Project #31780 - Market Structure

 

 

 

Indicate whether each of the following statements is true or false, and explain your answer.

 

1.If a monopolist is producing a level of output at which demand is inelastic, the firm is not maximizing profits, and increasing output will decrease total revenue.

 

2.When a monopolist maximizes profits, the price is greater than the marginal cost of producing the output. This means that consumers are willing to pay more for additional units of the product than these additional units cost to pro-duce. Thus, the monopolist should produce and sell additional units of output.

 

3.A monopolistically competitive firm produces a level of output at which price equals $ 80, marginal revenue equals $40, average total cost equals $100, marginal cost equals $40, and average fixed cost equals $10. To maximize profit, the firm should produce a smaller output and sell it at a higher price.

 

4.In a monopolistically competitive market, a firm has market power because it produces a differentiated product. This means that the firm earns positive economic profit in the long run.

 

 

 

Hagerty and Robert Berner, “Ever Wondered Why Furniture Shopping Can Be Such a Pain?” Wall Street Journal, November 2, 1998; Dan Morse, “U. S. Furniture Makers Seek Tariffs on Chinese Imports,” Wall Street Journal, November 3, 2003; and Mark H. Drayse, “Globalization and Regional Change in the U. S. Furniture Industry,” Growth and Change 39 (June 2008): 252–282.

 

Farnham P.G. Economics for Managers. Upper Saddle River. NJ: Prentice Hall  

 

Subject Business
Due By (Pacific Time) 05/26/2014 01:00 pm
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