Suppose both a monopolist and a perfectly competitive firm charge a price corresponding to the quantity at the intersection of the marginal cost and marginal revenue curves. If this price is between each firm's average variable cost and average total cost curves, a.both firms will shut down in the short run. b.both firms will continue to operate in the short run. c.the perfectly competitive firm will continue to operate in spite of the loss but the monopolist will earn a profit. d.the perfectly competitive firm will continue to operate in the short run but the monopolist will shut down.

The question is based on the shutdown rule.

Answered: Suppose both a monopolist and a…

Economics For Today

10th Edition

ISBN:9781337613040

Author:Tucker

Publisher:Tucker

Chapter9: Monopoly

Section: Chapter Questions

Problem 7SQP

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Suppose both a monopolist and a perfectly competitive firm charge a price corresponding to the quantity at the intersection of the marginal cost and marginal revenue curves. If this price is between each firm's average variable cost and average total cost curves,

	a.	both firms will shut down in the short run.
	b.	both firms will continue to operate in the short run.
	c.	the perfectly competitive firm will continue to operate in spite of the loss but the monopolist will earn a profit.
	d.	the perfectly competitive firm will continue to operate in the short run but the monopolist will shut down.

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