Question

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. Agree or Disagree? Why? Explain your answer and give examples.

4. There is no effective way to calculate profit or loss based on short-term profit maximizing output decisions. Agree or Disagree? Why? Explain your answer and give examples.

5. A firm may continue to operate in the short run even while incurring losses. Agree or Disagree? Why? Explain your answer and give examples.

6. There is no significance of P=minATC=MC over the long run. Agree or Disagree? Why? Explain your answer and give examples.

4. There is no effective way to calculate profit or loss based on short-term profit maximizing output decisions.

Answer 1

Answer: 1:

Producing where Marginal Revenue equals marginal cost does not maximize profit or minimizes losses: Disagree

Explanation : because firm produces at the point where marginal revenue equals marginal cost as at this point their profit maximizes and loss minimizes. The equilibrium point MR=MC determines the profit maximizing price and quantity of a firm.

Example : every market structure maximizes its profit and minimizes its losses at the equilibrium point MR=MC

As shown in the below graph: it is a perfect competition situation where MC curve intersect horizontal straight line MR curve at E point and the point determines the profit maximizing quantity and output of the firm

answer: 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: Disagree

Explanation : because the arithmetic and graphical analysis makes the calculation and understanding of output demanded and supply and price decisions easy for the firms. through the graphs and arithmetic they can easily calculate their profit maximizing output and price. as shown in the above graph

we use graphical analysis with arithmetic in perfect, monopoly and monopolistic market structures while it is difficult to make graphs in case of oligopoly so we use arithmetic analysis extensively.

answer:3  

There is no contrast of demand curve differences between the four basic market structures : Disagree

because in case of perfect competition the demand curve is horizontal straight line as shown in the above graph by MR/D curve it shows that the demand is perfectly elastic in the perfect competition. while in monopoly the demand curve is downward sloping but comparatively more steeper as demand is less elastic and in monopolistic market demand curve is more fleeter than monopoly as demand is more elastic

Answer:4.

There is no effective way to calculate profit or loss based on short-term profit maximizing output decisions : Disagree

because firm can calculate profit and loss with the help of average variable cost curve (AVC) or average cost curve. if the AVC curve is less than the equilibrium point of MR =MC the the firm is earning profit and if the AVC curve is equal to the equilibrium point than there is no profit and no loss and if the AVC is higher than the equilibrium point that means firm is incurring losses.

5. A firm may continue to operate in the short run even while incurring losses. Agree