14. Refer to Table 14-15. What is the low est price at which this firm would ope

Question

14. Refer to Table 14-15. What is the low est price at which this firm would operate in the short run? a. S3. b. $4. c. S5 d. $6. 15. If the profit-maximizing quantity of production for a competitive firm occurs at a point where firm's average total cost of production is falling as production increases, then the firm a. will be earning positive economic profit at the profit-maximizing quantity b. will have economic profit less than zero at the profit-maximizing quantity. c. will have zero economic profit at the profit-maximizing quantity. d. should increase the quantity of production to increase profit. 16. Which of the following is a characteristic of a natural monopoly? a. Average cost exceeds marginal cost over large regions of output b. Increasing the number of firms increases each firm's average total cost. c. One firm can supply output at a lower cost than two firms. d. All of the above are correct. 17. The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways? a. A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. b. A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. c. For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. d. For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

Explanation / Answer

15) If the firms' average total cost is falling at the point of profit maximization then in that case "The firm should increase the quantity of production to increase the profit" The correct answer is "D". If the firm increases the production its total average cost will fall further and increase the profit.

16) The correct answer to this question is "D". All the options given are correct. In natural monopoly the monopoly earns a supernormal profit, it produces at a point where its average cost is greater than the marginal cost to earn a profit. The second option, if the number of firms is increased in a monopoly then the firm has to decrease its production to maintain it price elasticity and monopoly power. And the third option says a monopoly firm can produce alone at a much lower price and more output which is correct because the monopoly has a lot of excess capacity.

17) The correct answer is "C". If the monopoly increases its production its marginal revenue will increase or decrease at a different level of output. Because the marginal revenue curve is downward sloping.

PS: for question 14 .. please write the table values in the comment section I will answer.

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