The theory of monopolistic competition predicts that in long-runequilibrium a mo
ID: 1240577 • Letter: T
Question
The theory of monopolistic competition predicts that in long-runequilibrium a monopolistically competitive firm will:
A)produce the output level at which price equals long-run marginalcost.
B)operate at minimum long-run average cost.
C)overutilize its insufficient capacity.
D)produce the output level at which price equals long-run averagecost.
73.
Suppose that price is below the minimum average total cost (ATC)but above the minimum average variable cost (AVC), and the marketprice is expected to rise at least to ATC in the near future. Inthe short run, a firm that is a price taker would:
A)shut down temporarily, in hopes of restarting in the nearfuture.
B)immediately shut down and get out of the industry.
C)continue to produce a quantity such that marginal revenue equalsmarginal cost.
D)cut price and expand output in hopes of achieving economies ofscale
74.
What should a profit maximizing monopolist do if she iscurrently producing where MC < MR?
A)Operate only in the short run.
B)Keep producing at this level.
C)Shut down in the long run.
D)Decrease output until MC = MR.
E)Increase output until MC = MR.
75.
Imagine you own a machine that produces perfectly authentic andlegal $100 bills. You would use this machine until:
A)the variable cost began to rise.
B)the total cost began to fall.
C)the marginal cost was $100.
D)the bills became worthless.
E)the marginal revenue began to fall.
76.
Maximizing profit means finding the maximum differencebetween:
A)price and AR.
B)MR and MC.
C)price and ATC.
D)ATC and MC.
E)TR and TC.
77.
In long-run equilibrium, the typical perfectly competitive firmwill:
A)do any of these.
B)change plant size in the long run.
C)earn zero economic profit.
D)change output in the short run.
78.
The monopolist's demand curve is:
A)a horizontal line at the market price.
B)below the marginal revenue curve.
C)a U-shaped curve.
D)identical to the marginal revenue curve.
E)identical to the market demand curve.
Explanation / Answer
73. The shut-down condition for a firm is if the price isbelow ATC but above AVC the firm will shut down and hope for theprice to increase. The exit condition for a firm is if the price isbelow AVC. So the answer is A since the firm will wait for theprice to increase before they open their firm again.
74. A monopolist will maximize profit by producing at thepoint MR = MC and setting its price at the demand at the output. Sothe monopolist will want to increase its production till MR = MC.So the answer is E
75. If you had a machine that produced $100 dollar bills everyoutput would equal a profit of $100. So you would continueproducing $100 bills as long as the cost of the next $100 dollarbill is below $100. The cost of the next bill is represented as themarginal cost. So C is the answer
76. Profit = Total Revenue - Total Cost. So the maximumdifference between Total Revenue and Total Cost will be the highestprofit assuming Total Revenue is greater than Total cost. So iwould pick E
77. Perfectly competitive firms will earn zero economic profitin the long run as firms will enter the market if firms are makinga profit. Each firm in the perfectly competitive industryadjusts short-run production and long-run plant size toachieve profit maximization. So A is the Answer
78. When there is only one firm selling in a market, thatfirm is a monopolist. The demand curve for themonopolist is the demand curve for the industry. So E is theanswer
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.