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In: Economics

· Question 19 In the short-run, a monopolist should close down if its demand curve lies...

· Question 19

In the short-run, a monopolist should close down if its demand curve lies below:
  1. The AVC curve for all output levels
  2. The AFC curve for all output levels
  3. The ATC curve for all output levels
  4. The TC curve for all output levels

· Question 20

A monopoly results in underallocation of resources because at the equilibrium output:
  1. MR > MC
  2. Marginal profit equals zero
  3. P > MC
  4. ATC of the monopolist is greater than minimum ATC

· Question 21

Under monopoly regulation, if the regulatory commission aims at the allocative efficiency,
  1. It should seek the fair-return pricing
  2. It should set the price at the monopolist ATC
  3. It should set the price at the monopolist MC
  4. It should set the price at the monopolist’s MR = MC

Solutions

Expert Solution

a) If the output of the monopolist lies below the AVC at all costs the firm will close down, the answer is "A".

b) "D"

ATC of the monopolist will be greater than the minimum point of ATC.

c) "C"

If the price of the goods and MC are equal then the firm is under allocative efficiency.

Rahul Sunny answered 2 years ago
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