1. if a profit maximizing monopolist can perfectly price discriminate, the level

Question

1. if a profit maximizing monopolist can perfectly price discriminate, the level of output it chooses is allocatively efficient (true or false)?

2. Standard economic theory suggests that the firm should produce a positive amount of output so long as average sunk costs are below marginal revenue (true or false)?

3. if the average total cost curve is downward sloping, then marginal cost must be below average total cost (true or false)?

4. if a profit maximizing theoretical competitive firm has total revenue larger than average variable costs, but smaller than average total cost; then it is earning negative profit, but will not shut down in the short run.1.f a profit maximizing theoretical competitive firm has total revenue larger than average variable costs, but smaller than average total cost; then it is earning negative profit, but will not shut (true or false)?

5.1.the reason why a typical marginal cost curve rises beyond some point, is that the best and most productive workers hired “first” so when output expands only less productive workers (who are naturally not as productive as the first workers hired). Are left to employ. (true or false?)

Explanation / Answer

1) True, They can maximize profits by choosing the level of price and making it perfect and this makes the output level allocatively efficient.

2) False, Maximum profit or output is achieved when the gap between total revenue over total cost is higher. The total revenue must exceed total cost by a large amount to have a good quantity.

3) True, The slope of the Marginal cost is more than that of the average total cost curve and hence it will be below average cost and also the fall is higher in marginal cost.

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