The figure given below shows revenue and cost curves of a monopolistically firm.
ID: 1153114 • Letter: T
Question
The figure given below shows revenue and cost curves of a monopolistically firm. Figure: 12.1 Quartty In the figure MR: Marginal revenue curve ATC: Average total cost curve AVC: Average variable cost curve MC: Marginal cost curve 17. Consider the monopolistically competitive firm described in the Figure 12.1. The profit-maximizing output level and price areandrespectively. b In D e. J E 18. According to Figure 12.1, the firm a. will shut down temporarily at any price below A b. will operate at a price below A, as long as it is greater than marginal cost. c, will shut down at a price below A only in the long run. d. will break-even at the price level C. e. will shut down if the price falls below E 19. According to Figure 12.1, the profit-maximizing firm is a. profit on each unit produced, equal to the distance b. loss on each unit produced, equal to the distance c. profit on each unit produced, equal to the distance d. loss on each unit produced, equal to the distance e. loss on each unit produced, equal to the distance making an average: BG. BG. CE DG. AC.Explanation / Answer
17) In monopolistically competitive market profit is maximized at MR=MC. Here quantity at MR=MC is H and price charged on the demand curve for H is D. option b is correct.
18) If firms P<ATC but P>AVC, it is making a loss in the short run. The firm will continue its production as the price is above average variable cost. But if the P<AVC firms exit from the market temporarily. Option a is correct.
19) Here P<ATC. ATC is G and P is D. So the loss is equal to the distance of DG. Option d is correct.