enue average total cost rue maiginal Price = marginal cost teveiué and the price
ID: 1122931 • Letter: E
Question
enue average total cost rue maiginal Price = marginal cost teveiué and the price e. Both B and D (Questions 7-9 refer to the chart below) At a price of Pa and production level Qo, which of the following is true: a. The firm is making profit, because the marginal cost at Po, QG is lower than the average total cost b. The firm should increase production to Qe to maximize profits c. The firm should reduce production to maximize profits d. The firm should raise prices, while keeping output constant to maximize profits Both A and B 8. This firm will choose which of the following price and output level: a. PA b. PH c. Po d. Pe e. Ps Assuming the firm operates in a monopolistically competitive market, what is most like happen in the long-run: 9. a. Demand will shift to the left and become more elastic b. Demand ill shift to the left and become more inelastic c. Price will remain unchanged d. Price will rise e. Production will increaseExplanation / Answer
7. Option c. Since the firm is operating in a monopoly market condition it has the market power, so it can the reduce the production to Qh and price at point A, price of Pa
8. Option a. Pa and Qh as it earns more profit
9. Option e. Suppose the market structure changes and it becomes monopolistically competitive market then the production will increase leading to decreased price and profits.
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