FIGURE 10- 4 Suppose a Monopolist Faces the Demand Curve

question 2

Multiple Choice

FIGURE 10- 4 Suppose a monopolist faces the demand curve and cost curves shown below.

-Consider a single- price monopolist that is operating in the inelastic range of its linear demand curve.This firm

• A)would be operating where its AR is negative.
• B)would be operating at its profit- maximizing position.
• C)would have a marginal revenue curve that is negative.
• D)could raise its total revenue by lowering its price.
• E)would have a marginal revenue that is negative although its total revenues would be at a maximum.

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Definitions:

Marginal Cost

The cost implicated in generating an added unit of a product or service.

Efficient Allocation

The distribution of resources in a way that maximizes the net benefit received by an economy.

Allocative Efficiency

A state of the economy where resources are apportioned in a way that maximizes the overall benefit to society.

Productive Efficiency

A state where an economy or entity cannot produce more of one good without producing less of another, utilizing all resources in the best possible way without waste.