Question

QUESTION 18

1. Firm A and firm B both have total revenues of $200,000 and total costs of $250,000; firm A has total fixed costs of $40,000, while firm B has total fixed costs of $70,000. Which of the following statements are true in the short run?

   		Firm A should operate and Firm B should shut down.
   		Firm B should operate and Firm A should shut down.
   		Both firms should operate.
   		Both firms should shut down.

2.5 points   

QUESTION 19

1. Since there are no close substitutes for the monopoly's product, the monopoly can charge any price it wishes.

   True

   False

2.5 points   

QUESTION 20

1. Since a monopoly can set any price it wants, it always makes a profit?

   True

   False

2.5 points   

QUESTION 21

1. In its effort to maximize economic profit, a firm with market power must determine:

   		only the price it should charge.
   		only the quantity it should produce.
   		both the price it should charge and the quantity it should produce.
   		neither the price it should charge and the quantity it should produce as these are both determined by forces beyond the firm's control.

2.5 points   

QUESTION 22

1. Compared to the equilibrium price and quantity sold in a competitive market, a monopolist will charge a ________ price and sell a ________ quantity.

   		higher; larger
   		lower; larger
   		higher; smaller
   		lower; smaller

Answer 1

a) "C"

Both the firms in the market should be operating in the short run as the revenue of both the firms in the market is more than the variable costs.

b) false

They will charge the price at which the profit of the firm can be maximised.

c) False

there are chance in the market when the monopoly will not be making any profit in the market.

d) "B"

They determine the quantity that they should produce which is determined at the point were the MR and the MC are equal and the price Is set accordingly on the demand curve.

e) "C"

A monopolist in the market will be charging a higher price and selling a lower quantity in the market.