1) Firms often use patent rights as a: 1) A) barrier to entry. B) barrier to exi
ID: 1113687 • Letter: 1
Question
1) Firms often use patent rights as a: 1) A) barrier to entry. B) barrier to exit C) way to achieve perfect competition. D) none of the above Cost vei dellars por yean Figure 8.3.1 2) Refer to Figure 8.3.1 above. At which point or range is profit maximized?2) A) Between points A and B B)At point C C) At point B D) Between points B and C 3) A firm maximizes profit by operating at the level of output where: 3) A) total costs are minimized. B) average revenue equals average cost. C) marginal revenue exceeds marginal cost by the greatest amount. D) average revenue equals average variable cost. E) marginal revenue equals marginal cost.Explanation / Answer
1) The correct choice is A
Explanation : - Any impediment that prevents new firms from entering an industry and competing on an equal basis with existing firms constitute barriers to entry . Patents, licenses , and other legal restrictions provides protection to some producers against competition.
2) The correct choice is option B
Explanation : - The revenue curve is rising and reaches maximum at point c and then afterwards it starts to decline. Hence revenue is maximized at point c.
3) The correct choice is option E
Explanation : - Economic profit, the difference between total revenue and total cost, is maximized where marginal revenue equals marginal cost. A profit maximizing firm should increase output until the marginal benefit of an additional unit equals the marginal cost.
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