15. If the profit-maxim izing quantity of production for a competitive firm occu
ID: 1126339 • Letter: 1
Question
15. If the profit-maxim izing quantity of production for a competitive firm occurs at a point where the firm's average total cost of production is falling as production increase a. will be b. will h s, then the firm ing positive economic profit at the profit-maximizing quantity ave economic profit less than zero at the profit-maximizing quantity. I have zero economic profit at the profit-maximizing quantity. d. should increase the quantity of production to increase profit 16. Which of the following is a characteristic of a natural monopoly? a. Average cost exceeds marginal cost over large regions of output b. Increasing the number of firms increases each firm's average total cost. c. One firm can supply output at a lower cost than two firms. d. All of the above are correct. 17. T which of the following ways? he profit-maximization problem for a monopolist differs from that of a competitive firm in a. A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. b. A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. c. For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. d. For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.Explanation / Answer
15.
Since the perfect competition profit-maximising quantity occurs at a point where ATC is increasing as more output is produced, then there will be positive economic profit because the price will be greater than the AC at this point.
Hence option a is the correct answer.
16.
A natural monopoly exists in the market if one market can supply goods and services at a lower average cost which others available firm or entering firm cannot produce goods at such a lower AC.
Hence option C is the correct answer.
17.
Since the perfectly competitive firm profit-maximising condition are ;
Price=MC=MR=AR
The monopolist profit-maximising condition exists at point where
MR =MC
As it can be seen that fist three option does not satisfy the profit-maximizing condition simultaneously of the both market.
Hence option d should be the correct answer.
Option d ;
For a profit-maximizing competitive firm, thinking at the margin is much more important than it for a profit-maximising monopolist.
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