The figure given below represents an imperfectly competitive resource market. Here common land (and not land used for specific purpose) is under consideration.Figure 18.1

-If a hydel power plant expects the interest rate to rise in near future, it might resort to installation of more turbines and dynamos in its firm in the present period.

Question

The figure given below represents an imperfectly competitive resource market. Here common land (and not land used for specific purpose) is under consideration.Figure 18.1
 
-If a hydel power plant expects the interest rate to rise in near future, it might resort to installation of more turbines and dynamos in its firm in the present period.

Quizplus · Accepted Answer

Expecting a rise in interest rates in the near future might encourage a hydel power plant to invest in more turbines and dynamos now. This is because the cost of borrowing money for such investments is likely to increase as interest rates rise, making future investments more expensive. By investing now, the firm can lock in the current, lower interest rates, potentially saving money on the cost of expanding their capacity.

The Figure Given Below Represents an Imperfectly Competitive Resource Market