1. Explain the effects of low price-guarantee on the price. (1.5 Marks)
2. Give reasons, when average cost increases as the total output increases for an increasing cost industry. (1.5 Marks)

3.

Figure shows the market for a successful price-fixing arrangement (cartel) between two identical firms. When the two firms act like one and charge the same price (2 Marks)
a. What will be the market price?
b. How much each firm will produce and sell quantity?

Market Power
1.Write a one to two-page paper, addressing the following:
a. Describe in your own words the concept of market power.
b. What are the three reasons that a market might have a Monopoly?
c. Give an examples of two monopoly Firm exercising its market power.