1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue,...

1.If the firm is producing at a quantity of output where marginal cost exceeds marginal revenue, then ________. (there can be multiple answers.)

A)the firm should reduce production

B)each marginal unit adds profit by bringing in more revenue than its cost

C)the firm's perceived demand will shift to the left

D)the excess profit would attract additional competition

2.In what way(s) is a monopolistically competitive firm inefficient?(there can be multiple answers.)

A) It does not produce at the minimum of its average cost curve.

B) It charges a price higher than marginal cost.

C) It produces where marginal revenue is equal to marginal cost.

3.Within a monopolistically competitive industry, it would be expected that: (there can be multiple answers.)

A)firms make a positive or negative economic profit in the short-run.

B)in the short-run, an innovative firm’s price is greater than their average cost.

C)firs make a positive economic profit in the long-run.

D)in the long-run, a typical firm’s price is greater than their average cost.

Solutions

Expert Solution

The output level should be reduced to the level where MR = MC.

At a given level, where, MC is exceeding MR, the firm is incurring losses.

------------

A monopolistic firm has excess capacity, as it does not produce where the ATC is lowest. It makes the firm to show inefficiency as well. It makes the firm to put price that is more than the MC. But, profit maximizing output is achieved when MR equals MC.

------------

Monopolistic firm can get positive or negative economic profit in the short run, depending upon the ATC level and market. But, in the long run, economic profit will be zero. Further, innovative firm, comes up with innovative product that is sold at higher price in the short run. So, its price is higher than the ATC in the short run.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost,...

If a profit-maximizing firm is producing an output level in which marginal revenue exceeds marginal cost, should it produce more, less or the same? Why? What is the profit-maximizing quantity for any firm to produce?

1. Firm X is producing the quantity of output at which marginal revenue equals marginal cost....

1. Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is earning A. a positive economic profit. B. an economic loss. C. a normal profit. D,There is not enough information to answer the question. 2. A perfectly competitive firm will always maximize short-run profits by producing the level of output where the average total cost is minimized. A.True B.False

Why will a profit-maximizing firm never choose to produce at a quantity where marginal cost exceeds marginal revenue?

Why will a profit-maximizing firm never choose to produce at a quantity where marginal cost exceeds marginal revenue?a. Draw the marginal cost/marginal revenue graph and use it to help you explain.b. Which two lines on a cost curve diagram intersect at the zero-profit point?

11. A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

11. A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue willA) rise and its total variable cost will rise even more.B) rise and its total variable cost will rise, but not by as much.C) fall but its total variable cost will rise.D) fall and its total variable cost will fall, but not by as much.12. Bob's Lawn Care Services is a perfectly competitive...

Suppose a firm is producing a level of output such that marginal revenue is equal to...

Suppose a firm is producing a level of output such that marginal revenue is equal to marginal cost. The firm is selling its output at a price of $6 per unit and is incurring average variable costs of $7 per unit and average total costs of $8 per unit. Given this information, it may be concluded that the firm: Group of answer choices is operating at maximum total profit is operating at a loss that could be reduced by shutting...

If marginal cost exceeds marginal revenue, the firm A)should reduce its average fixed cost in order...

If marginal cost exceeds marginal revenue, the firm A)should reduce its average fixed cost in order to lower its marginal cost. B)may still be earning a positive accounting profit C)should increase the level of production to maximize its profit. D)is most likely to be at a profit-maximizing level of output. Who is a price taker in a competitive market? A)both buyers and sellers B)buyers only C)sellers only D)neither buyers nor sellers For a competitive firm, A)total cost equals marginal revenue....

A company produces at an output level where marginal cost is equal to marginal revenue and...

A company produces at an output level where marginal cost is equal to marginal revenue and has the following revenue and cost levels: Total revenue = $1,450 Total cost = $1,500 Total variable cost = $1,300 What would you suggest? shut down continue to produce because the loss is less than the total fixed cost increase production to lower the marginal cost reduce output to lower the marginal cost raise the price

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost...

1..A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal. A)True B)False 2..In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A)average total cost. B)marginal revenue. C)average variable cost. D)average cost. 3..Which is not true for a monopolistically competitive industry? A).Firms tend to operate with excess capacity. B). Each firm faces a downward-sloping demand curve. C). These firms earn zero...

1. Producing where Marginal Revenue equals marginal cost does not maximize profit or minimizes losses. Agree...

1. Producing where Marginal Revenue equals marginal cost does not maximize profit or minimizes losses. Agree or Disagree? Why? Explain your answer and give examples. 2. Basing the determination of the short-term profit maximizing output for individual firms based on the four basic market structures by using arithmetic and graphical analysis is not effective method. Agree or Disagree? Why? Explain your answer and give examples. 3. There is no contrast of demand curve differences between the four basic market structures....

A monopolistic firm is currently producing 3,500 units of output; price is $100, marginal revenue is...

A monopolistic firm is currently producing 3,500 units of output; price is $100, marginal revenue is $7, average total cost is $5.50, marginal cost is $4.50, and average variable cost is $3.75. The firm should a. raise price because the firm is losing money. b. keep the price the same because the firm is producing at minimum average variable cost. c. raise price because the last unit of output decreased profit by $5.50. d. lower price because the next unit...

Subjects