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Answer to Question #64303 in Other Economics for Ayomide Adebiyi

Question #64303
1(a)Identify three differences between debentures and shares
(b)With the aid of a diagram, analyze the effect of a decrease in the import duty on cars on the price and consumption of petrol
(c)Who is a discrimination monopoly
(d)Explain four conditions necessary for a monopolist to practice price discrimination?
(e)Who is a non-discriminating monopoly
(f)Describe five ways through which the central bank regulates the money supply in an economy
Expert's answer
1. (a)
1) Ownership (The share of a company provides ownership to the shareholders. Debenture-holders are creditors of a company who provide loan to the company).
2) Certainty Of Return (No certainty of return in case of loss for the shareholder. Debenture-holder receives the interest even if there is no profit).
3) Control (Shareholders have the right to participate and vote in company's meeting. Debenture holders do not possess any voting right and can not participate in meeting).
(b) A decrease in the import duty on cars will cause the increase in demand for petrol, so the price and consumption of petrol will increase too.
(c) A discriminating monopoly is a single entity that charges different prices not associated with the cost to provide the product or service for different consumers.
(d) The main conditions that must be met if a price discrimination scheme is to work are that the firm must be able to identify market segments by their price elasticity of demand and that the firms must be able to enforce the scheme.
(e) A non-discriminating monopoly is a monopoly that charges the same price for all consumers of its products.
(f) The five ways through which the central bank regulates the money supply in an economy are: 1) print more money, 2) set the reserve requirement, 3) influence interest rates, 4) engage in open market operations, 5) introduce a quantitative easing program.

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