1.) A profit maximizing firm will shutdown and produce zero output under perfect

Question

1.) A profit maximizing firm will shutdown and produce zero output under perfect competition if:
A.Marginal revenue is less than marginal cost
B.Price is higher than average variable cost but less than average total cost
C.Price is less than average variable cost
D.Price is less than average total cost
2.) What is the advertisers' dilemma?
A.Advertising is a fixed cost that is also a sunk or ignorable cost, but firms cannot ignore advertising because it is one of the largest explicit costs for firms.
B.The firms in a market would earn higher profits if they reduced or eliminated their ad campaigns, but none of the firms can take this action alone.
C.The firm would make more money if it switched to online ads, but it cannot afford to do so until it earns more money from sales.

3.) Please consider a natural monopoly that is regulated to operate at the average-cost price. Which of the following statements about this market is NOT true?
A.The seller earns zero economic profits
B.Consumers enjoy higher consumer surplus than they would under monopoly pricing
C.Quantity supplied is higher than it would be under monopoly pricing
D.There is zero deadweight loss

4.) The US federal government can impose fines and prison sentences on firms and executives that violate antitrust laws, but it cannot determine how firms structure their business operations.
A.True
B.False

Explanation / Answer

C.Price is less than average variable cost B.The firms in a market would earn higher profits if they reduced or eliminated their ad campaigns, but none of the firms can take this action alone. D.There is zero deadweight loss A.True

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