Essay on Mc 6- Firms with Market Power

1429 WordsAug 9, 20126 Pages
1. At the current level of output a firm's marginal cost equal 16 and marginal revenue equals 10. The firms A is producing the profit-maximizing amount. B should produce more. C should produce less. D Not enough information. 2. If the demand curve a monopoly faces is P = 100 - 2Q, then profit maximization A is achieved when 25 units are produced. B is achieved by setting price equal to 25. C is achieved only by shutting down in the short run. D cannot be determined solely from the information provided. 3. If the demand curve a monopoly faces is P = 100 - 2Q, and MC is constant at 16, then profit maximization A is achieved when 21 units are produced. B is achieved by setting price equal to 21. C is achieved…show more content…
B hire more labor because the next unit of labor increases profit by $500. C hire more labor because the next unit of labor increases profit by $200. D hire less labor because the last unit of labor added more to total cost ($300) than to total revenue ($10). 16. A monopolist is producing a level of output at which price is $65, marginal revenue is $35, average total cost is $35, and marginal cost is $50. In order to maximize profit, the firm should A keep output the same. B produce less. C produce more. D decrease price. E both c and d 17. A profit-maximizing monopolist will A always charge a price higher than average cost. B always charge a price higher than marginal cost. C always produce a level of output at which marginal revenue equals marginal cost. D both b and c E all of the above 18. All of the following could be a barrier to entry EXCEPT: A a government franchise. B decreasing long-run average cost. C patents. D switching costs. E rising LMC. 19. A monopolistically competitive industry is in the process of moving toward long-run equilibrium. This period the product of a typical firm has more substitutes than last period. This means that A there was entry into the industry. B a typical firm will produce more this period. C a typical firm's profits will fall this period. D both a and c E all

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