You are hired as a consultant to a monopolistically competitive firm. The firm reports the following...

You are hired as a consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost:

P = MC, P> ATC

Which of the following statements is true about the firm? Check all that apply.

The firm can increase its profit by reducing its output.

The firm is in long-run equilibrium.

The firm is possibly maximizing profit.

Solutions

Expert Solution

The monopolistic firm produces at MR=MC to maximize profit but the firm is producing at MC=P so the firm can increase profit by reducing output.
The firm is not in long run because in long run P=ATC

option first

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

you are hired as the consultant to a monopolistically competitive firm

you are hired as the consultant to a monopolistically competitive firm. The firm reports the following information about its price, marginal cost, and average total cost. Can the firm possibly be maximizing profit? If the firm is profit maximizing, is the firm in a long-run equilibrium? If not, what will happen to restore long-run equilibrium? a. P < MC, P > ATC I would think that the firm can’t possible be maximizing profit. The firm should raise price, so that...

A firm has hired you as a consultant. This firm is perfectly competitive and has no...

A firm has hired you as a consultant. This firm is perfectly competitive and has no control over price. This firm is selling 10,000 units at a price of $3. Total costs are $40,000. Total variable costs are $35,000. They can produce another unit at a cost of about $3. What do you recommend? shut down continue to operate at a loss in the short run decrease quantity increase quantity

A firm has hired you as a consultant. This firm is not perfectly competitive--it has some...

A firm has hired you as a consultant. This firm is not perfectly competitive--it has some control over prices. This firm is currently selling 1000 units, generating $10,000 in revenues and $12000 in total costs. The marginal revenue is about $4, it costs them about $5 to make another unit. Per unit variable costs are about $5 per unit. Based on your analysis, what do you recommend? shutdown operate at a loss change nothing decrease price, increase quantity increase price,...

Suppose that you have the following numbers for a firm in a monopolistically competitive industry. Total...

Suppose that you have the following numbers for a firm in a monopolistically competitive industry. Total Revenue=1200 Marginal Revenue=10 Total Cost=700 Total Variable Cost=500 Price=12 MC=6 Explain how you know that: a. this firm is not maximizing profit. b. this firm is operating in the short-run. c. there is excess capacity or “waste” associated with this firm (Hint: Given the information above, what is ATC? Is the firm operating at the minimum of the ATC curve?)

You have been hired as a security consultant for a law firm. Which of the following...

You have been hired as a security consultant for a law firm. Which of the following constitutes the greatest source of security threats to the firm? A) Wireless Network B) Employees C) Authentication procedures D) Lack of data encryption

You have been hired as a consultant for the following perfectly competitive firms firms. Treat each...

You have been hired as a consultant for the following perfectly competitive firms firms. Treat each firm individually. Thus each row represents one firm. You will need to use the MR =MC analysis rules to make the recommendations to the firms. You will be using logic and critical thinking skills to make the suggestions. Examine the information on MR, MC, Price, ATC, AVC and AFC to make a recommendation to each firm. Remember firms want to max their total profits,...

Question 2. Suppose you are a consultant for a firm that is perfectly competitive. The firm...

Question 2. Suppose you are a consultant for a firm that is perfectly competitive. The firm is worried only about its policies in the short run. What would you recommend in terms of quantity changes (raise, cut, shut down or stay put) and price changes (raise, cut, stay put) in each of the following situations: a. [15 points] P $19 MC $14 AVC $20 b. [15 points] P S11MC S106 AVC $107 Notations/Abbreviations: P- price; MC-marginal cost; AVC- average variable...

1. A monopolistically competitive firm differs from a firm in perfect competition because a monopolistically competitve...

1. A monopolistically competitive firm differs from a firm in perfect competition because a monopolistically competitve firm is characterized by: A. zero economic profits. B. marginal revenue equals marginal cost. C. price is greater than marginal cost in equilibrium. D. a horizontal demand curve. 2. A monopolistically competitive firm is different from a monopoly because a monopolistically competitive firm is characterized by: A. zero economic profits. B. marginal revenue equals marginal cost. C. price = min ATC D. no deadweight...

You are the manager of a monopolistically competitive firm. the present demand curve you face is...

You are the manager of a monopolistically competitive firm. the present demand curve you face is p=100-4Q. your cost function is cQ=50+8.5Q^2 a. What level of output should you choose to maximize profits? b. What price should you charge? c. What will happen in you market in the long run? explain

You are the manager of a monopolistically competitive firm, and your demand and cost functions are...

You are the manager of a monopolistically competitive firm, and your demand and cost functions are given by Q = 36 – 4P and C (Q) = 4 + 4Q + Q(squared). Find the inverse demand function for your firm’s product. Determine the profit-maximizing price and level of production. Calculate your firm’s maximum profits. What long-run adjustments should you expect? Explain

Subjects