Question

A monopolistic competitor produces 100 units of a good at a per-unit cost of $22. If it charges a price of $19 per unit of the good, it will ________.

A. earn zero economic profits in the short run

B. incur a loss of $300 in the short run

C. earn a profit of $1,900 in the short run

D. incur a loss of $100 in the short run

A monopolistically competitive firm makes positive economic profits if ________.

A. price is less than average total cost

B. price is higher than average total cost

C. price equals marginal cost

D. price equals average fixed cost

A monopolistic competitor earns zero economic profits if ________.

A. price is higher than average total cost

B. price is lower than marginal cost

C. price is equal to marginal cost

D. price is equal to average total cost

A monopolistic competitor incurs losses if ________.

A. price is higher than average total cost

B. price is lower than marginal cost

C. price is equal to marginal cost

D. price is lower than average total cost

Firm A charges $8.50 for each unit of Good X. If the average total cost of producing 1,000 units of Good X is $12 and the market for Good X is monopolistically competitive, Firm A ________ by producing 1,000 units of Good X.

A. earns a profit of $3,500

B. earns a profit of $1,000

C. incurs a loss of $1,000

D. incurs a loss of $3,500

Suppose a monopolistic competitor produces 2,000 units of the good in equilibrium and charges a price of $10 for each unit. If the average total cost of producing 2,000 units of the good is $6, what is the total profit earned by the producer?

A. $8,000

B. $4,000

C. $2,000

D. $20,000

Answer 1

Q1. Price per unit sold = 19 $
Cost per unit = 22 $
Loss = 22-19
= 3 $ per unit
Total loss = 3*100
= 300 $

B) incurs a loss of 300 $ in the short run

Q2. B) price is higher than average total cost.When the Market price is higher than the average total cost , the firm will earn economic profits equal to the amount of
= (PRice - ATC) * number of units sold
Q3. D) price is equal to average total cost. Profit is equal to zero when ATC = Price.

Q4. D ) price is lower than average total cost. A firm earns negative profits when price per unit is lower than the average total cost .

Q5. Marker price per unit = 8.5
Average total cost = 12.5
AS ATC is greater than price there will be loss
Loss per unit = 12-8.5
=3.5 $ per unit
Total loss = 1000 *3.5
= 3500 $
D. incurs a loss of $3,500

Q6. Profit per unit = 10$ - 6$
= 4$
Total profit = 2000 *4
=8000 $
A) 8000 $