Question

1.) True or False: A monopoly's Average Total Cost always decreases when the same firm's Marginal Cost is decreasing.

2.) If the Demand equation for a firm is Q = 1000 - 20P, the Marginal Revenue of the firm is ________ when the firm is producing 30 units.

3.) Here is some data at a certain point in time from a monopolistically competitive firm while making a short-run profit:

Price = $50; Quantity = 75 units; ATC @ 75 units = $34; MC @ 75 units = $25

In the long run, by how much will its economic profit decrease?

• A. $1,875
• B. $560
• C. $1,200
• D. They will not lose profit since they are making a substantial profit already

4.) Acme, Inc., a profit-maximizing firm with market power, finds that when it sets the of its product is $50, it's marginal revenue of a firm is $30.

• Calculate its elasticity of its demand.  E_D = - ______________
  [Enter a positive value.]
• The percentage of the $50 price contributes toward fixed costs and/or profits (after covering marginal costs) is __________. %.
• [Enter value as a percentage, for example 0.1 as 10 percent or 0.5 enter as 50 percent]

5.) Select ALL that are true out of the following:

A. Economies of scale can be a main barrier of entry for firms looking to enter a monopolistic market.
B. If an industry is a monopoly, the monopolist's Marginal Cost curve is the same as its supply curve.
C. In the long-run equilibrium of monopolistically competitive markets, firms produce at minimum average total cost.
D. In a monopolistically competitive market, a firm's Marginal Revenue curve is the same as its Demand curve.

Answer 1