7. The principle that a firm should produce up to the point where the marginal r

Question

7. The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies: ( I put A)

only to firms that can employ discriminatory pricing strategies

8. If a monopolist or a perfectly competitive firm is producing at a break-even point, then: ( I put II, IV)
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost

ii and iv

9. What do economies of scale, the exclusive ownership of essential raw materials used in the production process, and patents have in common? (I put A)

Explanation / Answer

Answer 7 :

MR = MC applies to both perfect competition and Monopoly. In the case of Perfect Competition we know that P= MC abd also P = MR as Price is constant, so, P = MR = MC. In case of monopoly, MR = MC. So, option i

Answer 8 :

At break even point of the firm, Total Revenue = Total Cost . Dividing both the sides by Quantity, we get TR / Q = TC / Q So, Average Revenue = Average Cost.

So, ii and iv.

Answer 9:

Option i. They both represent barriers to entry.

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