Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms?...

Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals ________ and then use the _________ curve to determine the price that is consistent with this particular quantity.
A. average total cost; demand
B. average variable cost; demand
C. average total cost; supply
D. marginal revenue; demand
E. marginal revenue; supply

14. When a firm operates in a state of excess capacity,
A. it must be operating in a monopolistically competitive market.
B. additional production would increase average total cost.
C. additional production would decrease the average total cost.
D. A and B, only
E. A and C, only
15. A monopolistically competitive firm is currently producing 15,000 units of output. At this level of output the firm is charging a price equal to $10, has marginal revenue equal to $6, has marginal cost equal to $6, and has average total cost equal to $12. From this information we can infer that
A. the firm is currently maximizing its profit or minimizing its loss.
B. the profits of the firm are equal to negative $30,000.
C. firms are likely to enter this market in the long run.
D. All of the above are correct.
E. A and B, only

Solutions

Expert Solution

Q13. Option D.

Q14. Option E. It refers to situation where the firm is producing less than capacity and can reduce the cost by producing more

Q15. Option D. Profit = TR-TC = 15000*10-15000*12 = - $30000

Rahul Sunny answered 2 years ago

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