Refer to Figure 19-11. The graph above depicts supply and demand ...

[nautica902]

Refer to Figure 19-11. The graph above depicts supply and demand for British pounds during a trading day. At a fixed exchange rate of 2.00 per pound, the pound is ________ versus the dollar.
 
  A ________ of the pound would correct the fundamental disequilibrium that exists in this market.
  A) overvalued; devaluation B) overvalued; revaluation
  C) undervalued; devaluation D) undervalued; revaluation

Question 2

A newspaper article in commenting on the local electric monopoly tells its readers that the company's dominant economic position as a monopolist allows it to produce whatever output level it desires and to set whatever price it wishes.
 
  Critically evaluate this position.

[SAUXC]

Answer to Question 1

A

Answer to Question 2

Monopolies can only control one variable at a time. If they choose to set the price then the output that is sold is a function of demand. If they choose an output level then the law of demand dictates that only one particular price will get the job done. A monopolist cannot simultaneously determine the price and the output level.

[nautica902]

TYSM

[FergA]

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