1630242209 2 call 20th July exam solutions

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BUSINESS AND INDUSTRIAL ECONOMICS [G-O] Final exam July 20th 2021 NAME AND SURNAME ________________________________________________________________ STUDENT ID________________________________________________________________ Multiple choice questions 1) Please evaluate the trueness of the following statements regarding the cellophane fallacy related to the SSNIP test: a) a monopolist ALWAYS sets an optimal price in correspondence of the inelastic portion of the demand curve, and for this reason, an increase in the current level of price might INDUCE customers to switch to other products that would not necessarily be substitutes under competitive conditions. b) a monopolist NEVER sets an optimal price in correspondence of the inelastic portion of the demand curve, and for this reason, an increase in the current level of price might INDUCE customers to switch to other products that would not necessarily be substitutes under competitive conditions. BONUS c) a monopolist NEVER sets an optimal price in correspondence of the inelastic portion of the demand curve, and for this reason, an increas e in the current level of price might DISCOURAGE customers to switch to other products that would not necessarily be substitutes under competitive conditions. d) a monopolist ALWAYS sets an optimal price in correspondence of the inelastic portion of the demand curve, and for this reas on, an increase in the current level of price might DISCOURAGE customers to switch to other products that would not necessarily be substitutes under competitive conditions. 2) There are two cities: Brighton and Hove. Electricity service distribution in both areas is a natural monopoly. The two monopolies and the two areas are identical in every aspect (e.g. n° consumers) except for two crucial factors: 1)…