Mc 6- Firms with Market Power Essay

1457 Words Sep 6th, 2012 6 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
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B earns economic profits. C produces that level of output at which long-run average cost is minimum. D all of the above E none of the above

21. A monopolistic competitor is currently producing 2,000 units of output; price is $100, marginal revenue is $80, average total cost is $130, marginal cost is $60, and average variable cost is $60. The firm should A raise price because the firm is losing money. B keep the price the same because the firm is producing at minimum average variable cost. C raise price because the last unit of output decreased profit by $30. D lower price because the next unit of output increases profit by $20.

22. In a monopolistically competitive industry in long-run equilibrium a. each firm is making zero profit. b. each firm is producing the output at which long-run average cost is at its minimum point. c. price equals marginal cost for each firm. d. all of the above

23. A firm is producing 10,000 units of output in two plants, A and B, and each plant is producing 5,000 units of output. The marginal cost in plant A is $10 and the marginal cost in B is $6. To reduce the cost of producing 10,000 units the firm should A produce more in A and less in B. B produce less in A and more in B. C produce it all in B because B is the lower cost plant. D do nothing since the output in each plant is equal.

24. To maximize its profit, a firm with two plants

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