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This firm should shut down.
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In Exhibit 7-9, product price in this market is fixed at $7. This firm is currently operating where MR = MC. What do you advise this firm to do?
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Below that point marginal revenue becomes insufficient to pay for avoidable average variable cost.
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In the short run, why would a firm in a perfectly competitive market shut down production if the prevailing market price falls below the lowest possible average variable cost?
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economic profits become zero.
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Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:
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rising part of marginal cost beginning at E.
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As shown in Exhibit 7-12, the firm's short-run supply curve is the:
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There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process.
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Which of the following correctly explains why sellers in a perfectly competitive market are price takers?
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$12
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In Exhibit 7-10, the maximum possible total profit is:
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$12 per lawn
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In Exhibit 7-15, what market price would cause E-Z-Care to just break even?
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made a loss of $500.
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Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:
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$1.50 per unit (point B).
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As shown in Exhibit 7-3, the firm will produce in the short run if the price is at least equal to:
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short-run marginal cost curve B.
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In Exhibit 7-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:
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a single seller, a unique product for which there are few if any suitable substitutes and extremely high barriers that make it difficult or impossible for new firms to enter the industry.
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A monopoly market structure is characterized by
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exists when one seller emerges in an industry because of economies of scale, is an industry in which the long-run average cost of production declines over the full range of output demanded in the market, and means that a single firm can supply the entire market demand at a lower cost than two or more smaller firms.
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A natural monopoly
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profit maximization
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Price is above ATC where MC=MR leads to
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loss minimization
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Price is below ATC where MC=MR leads to
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the entire market demand curve
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The monopolist faces
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elastic
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To maximize its profit, a monopoly should choose a price where demand is
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equal to 1
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When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is
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shut down
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Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will
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In the long run, a positive economic profit can be earned.
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Which of the following statements best describes the price, output, and profit conditions of monopoly?
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Marginal revenue is less than the price charged, Economic profit is possible in the long run, and A profit maximizing or loss minimizing production level occurs when marginal revenue equals marginal cost.
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Which of the following is true for the monopolist?
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the price that maximizes profit
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Although a monopoly can charge any price it wishes, it chooses
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OP4
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As shown in Exhibit 11, the profit-maximizing price for the monopolist is
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use more resources to produce additional output
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Consider the monopolist's profit maximizing output in exhibit 11. At this level of output, consumers will want the monopolist to
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none of the answers are correct
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As shown in Exhibit 11, the monopolist's total cost is which of the following areas?
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OQ2
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The profit-maximizing output for the monopolist in Exhibit 11 is
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D
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As shown in Exhibit 11, the monopolist's profit maximizing price-quantity point is
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stay in operation in the short run, but shut down in the long run if demand remains the same.
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Suppose a monopolist charges a price corresponding to the intersection of marginal cost and marginal revenue. If the price is between its average variable cost and average total cost curves, the firm will
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arbitrage
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The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as
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a difference in the price elasticity of demand among buyers.
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One necessary condition for effective price discrimination is
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theater tickets that offer lower prices for children.
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An example of price discrimination is the price charged for
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The alumni market
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Suppose there are two markets for football games: (1) rich alumni as fully committed to their alma mater as the lower-income students and (2) students. Based on this information, which market will have the lower elasticity, and thus the higher price, if the university can price-discriminate?
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maximize profit by setting marginal cost equal to marginal revenue.
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Both a perfectly competitive firm and a monopolist
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charge a price that would otherwise be charged if this market were a perfectly competitive market
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Consider the monopolist's profit maximizing price and output in exhibit 11. At this price and output level, consumers will want the monopolist to
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charge a higher price than the perfectly competitive firm
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Suppose a monopolist and a perfectly competitive firm have the same cost curves. The monopolistic firm would
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