If a nondiscriminating monopolist is operating at an output level where price equals average total cost, we can conclude that
a. economic profit is 0
b. the firm is not maximizing profit
c. the firm should go out of business in the long run
d. the firm is not earning its normal profit
e. the firm should shut down in the short run
QUESTION 2Regulation that intends to improve the quality of service provided by carpenters will tend to increase the price of their services.
a. True
b. False
QUESTION 3If price is less than its minimum average variable cost, a perfectly competitive firm that continues to produce in the short run
a. cannot cover any of its variable cost
b. incurs a loss greater than its fixed cost
c. can cover all of its fixed cost and some of its variable cost
d. can cover all of its variable cost and some of its fixed cost
e. can cover both its fixed costs and its variable cost
QUESTION 4Suppose that the demand for my new book, Spatulas From Around the World, is such that the demand curve lies everywhere below the average variable cost of producing it. To maximize profits or minimize losses, I should
a. raise price
b. lower price to increase demand
c. shut down the presses printing my book
d. lower price until demand is inelastic
e. charge the highest price I can
QUESTION 5A natural monopoly is a firm that experiences economies of scale over the range of market demand.
a. True
b. False
QUESTION 6At its present rate of output, 200 units, a perfectly competitive firm has total cost of 10,000 . marginal cost of 38, and fixed cost of 2,000 . and it charges the market price of 38 per unit. To maximize profit or minimize loss, this firm should
a. increase output
b. reduce output but not to zero
c. maintain the present rate of output
d. shut down
e. raise the price
QUESTION 7Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were perfectly competitive.
a. True
b. False
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