Is Company B likely to charge a higher or a lower price for the traffic signals than Company A?

1.       Which of the following is an example of a command-and-control approach?  a) Requiring trucking companies to only buy new trucks that are low-pollution. b) Charging a fee for use of a park. c) Raising taxes to pay for a new bridge. d) Offering low-interest loans to students.

2.       The local government needs to replace all its traffic signals. Two companies are competing for this business. Company A spends $100,000 on buying a new, more efficient machine to make traffic signals. Company B spends $100,000 on campaign contributions for the city council. a) If Company B wins the contract, is this an example of perfect competition, market power, rentseeking behavior, or monopoly? b) Is Company B likely to charge a higher or a lower price for the traffic signals than Company A? c) Would the taxpayers of the town prefer that Company A or Company B win the contract? Would the city council prefer that Company A or Company B win the contract?

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