When a Monopolist Faces a U-Shaped Average Cost Curve in the Short

question 221

Multiple Choice

When a monopolist faces a U-shaped average cost curve in the short run,we know that as more and more output is produced,the

• A) law of diminishing marginal returns eventually overrules the decrease in average fixed cost.
• B) decrease in average fixed cost eventually overrules the law of diminishing marginal returns.
• C) decrease in average fixed cost always overrules the law of diminishing marginal returns.
• D) law of diminishing marginal returns always overrules the decrease in average fixed cost.
• E) law of diminishing marginal returns coincides with the decrease in average fixed cost.

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Definitions:

Price Ceiling

A government-imposed limit on how high a price is charged for a product.

Oil Products

Refined products derived from crude oil processing, such as gasoline, diesel, jet fuel, and heating oil.

Hugo Chávez

Former Venezuelan military officer and politician who served as the President of Venezuela from 1999 until his death in 2013.

Price Ceiling

A legally imposed maximum price on a good or service, intended to prevent prices from rising above a certain level.