Assuming That Firms Maximize Profits, How Will the Price and Output

question 90

Multiple Choice

Assuming that firms maximize profits, how will the price and output policy of an unregulated monopolist compare with ideal market efficiency?

• A) The output of the monopolist will be too large and its price too high.
• B) The output of the monopolist will be too large and its price too low.
• C) The output of the monopolist will be too small and its price too high.
• D) The output of the monopolist will be too small and its price too low.

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Definitions:

Business Entity Assumption

A principle that requires a business to be accounted for separately from its owner or other businesses, ensuring that the company's financial statements reflect only its own operations and financial position.

Personal Automobile

A vehicle intended for private use by individuals rather than for commercial or industrial purposes.

Sole Owner

An individual who has full ownership and control over a business, bearing all the risks and benefits of the entity.

Accounting Equation

The fundamental principle of accounting that states assets equal liabilities plus owners' equity, serving as the foundation for double-entry bookkeeping.