ON 260 Figure#2:depicting the cost structure for a firm in a competitive market
ID: 1119409 • Letter: O
Question
ON 260 Figure#2:depicting the cost structure for a firm in a competitive market Price ATC Ps AVC Q1 Q2 Q Q4 Quantity 18. Refer to Figure#2, when price rises from P3 to Ps, the firm finds that a. remaining to produce output at Q2 would leave the firm with positive profit. b. marginal cost exceeds marginal revenue at a production level of Q2. c. expanding output to Q4 would leave the firm with positive profit. d. expanding output to Q3 would leave the firm with positive profit. titive firm must be operating at their efficient scale. Thus, Refer to Figure#2. The long-run 19. In the long run a perfectlycompe supply curve for a firm in a perfectly competitive market is a. the portion of its marginal cost curve that lies above its average total cost starting at price Pl and upward. b. the portion of its marginal cost curve that lies above its average variable cost starting at price P2 and upward c. the portion of its marginal cost curve that lies above its average total cost starting at price Ps and upward. d. the portion of its marginal cost curve that lies above its average total cost starting at price P4 and upward. 20. In the long run, a perfectly competitive market, which firms earn a negative economic profit. The market experiences: a, an increase in equilibrium price as firms exit. ca decrease in equilibrium price as old firms exit. b. more firms enter as long as they still make an economic loss. d. no new firms enter and no old firms leave the market. 21 Because a monopolist has market power, which of the following is a characteristic of a monopolist? It achieves efficiency in production at the profit-maximizing output as a perfect competitive does. b. When it produces an extra unit of output, it must lower its price on all of its production. c. It can charge any price as it wishes. d. It faces a horizontal market demand curve.Explanation / Answer
The correct option for question number 18 is option d.
When the price is P3 quantity is Q2, and when the price is increased to P5, the quantity is increased to Q4. And this quantity average total cost is lower which means firms are earning positive profit
Correct answer to question number 19 is option C. Average total cost is minimum when the price is P3. And we know that the supply curve of the firm is the rising portion of the marginal cost curve
Correct answer to question number 20 is option A. When market is in short run in there are negative profits those firms that cannot sustain negative profits leave the market in the long run and this decreases the supply curve which increases the price.
Option B is the correct choice for question 21. It is true that Monopoly has market power but to sell more it has to reduce its prices on all of its production.
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