Use the graph below depicting a profit-maximizing/loss-minimizing monopolistical

Question

Use the graph below depicting a profit-maximizing/loss-minimizing monopolistically competitive firm to answer questions 7 through 10. MC ATC $20 $17 $10 k $4- 1,200 1,500 The profit-maximizing output is- a. 1,200; $20 b. 1,200; $10 units and the profit-maximizing price is -. C. d. 1500: $4 8. At the profit-maximizing/loss-minimizing level of output, total revenue is total cost is a. $24,000: $12,000; $1,500 b. $12,000; $12,000; $3,000 and deadweight loss is approximately c. d. $25,500: $6,000:$24,000 $24,000: $24,000: $1,500 9. The graph illustrates a typical firm in a market that is in long-run equilibrium since: a. the output level is socially efficient. b. price is equal to minimum average total cost. c. price is equal to average total cost. d. price is equal to marginal cost. Which of the following events would cause this firm's profit to increase? a. b. c. d. 10. An increase in labor costs An increase in consumer demand A decrease in labor productivity A decrease in consumer demand

Explanation / Answer

7) The profit maximising output for the firm is 1200 units at price of $20. To maximise profit the firm will try to match his Marginal curve with Marginal cost curve and produce the output at that point. The correct answer is "A".

8) At the profit maximising level, the total cost of producing one unit is $20 and total goods produced are 1200. So total cost incurred will be 24,000. One unit of product is sold at a price of $20. Total revenue will be 24,000. The correct answer will be "D". The firm is not making any profit or loss.

9) The given firm is in long-run equilibrium because the price is equal to the Average Total Cost. the correct answer will be "C".

10) An increase in consumer demand will cause the firm's profit to increase, on the other hand, options like an increase in labor cost, decrease in labor productivity and a decrease in consumer demand will cause loss. The correct answer will be "B".

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