Problem set #7 (a) If a monopolist or a perfectly competitive firm is producing

Question

Problem set #7

(a)

If a monopolist or a perfectly competitive firm is producing at a break-even point, then:
i. average revenue is equal to average variable cost
ii. average revenue is equal to average total cost
iii. total revenue is equal to total variable cost
iv. total revenue is equal to total cost

(b) The principle that a firm should produce up to the point where the marginal revenue (MR) from the sale of an extra unit of output is equal to the marginal cost (MC) of producing the extra unit applies:

Explanation / Answer

1) break even point is where no profit and no loss: TR=TC and ATR=ATC.

2) to both perfectly competitive firms and monopolies

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