The Diagram Below Shows Selected Cost and Revenue Curves for a Firm

question 41

Multiple Choice

The diagram below shows selected cost and revenue curves for a firm in a monopolistically competitive industry. FIGURE 11- 1
-Refer to Figure 11- 1. If this firm is maximizing its profits, does the diagram depict a long- run equilibrium situation?

• A) No, because this firm is a natural monopoly.
• B) Yes, because this firm is producing where MC = MR and is earning economic profits.
• C) Yes, because this firm is producing where MC = MR and is earning zero profits.
• D) No, because this firm is suffering losses and firms will exit this market.
• E) No, because this firm is earning profits which will attract new firms to this market.

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Definitions:

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Actions or reactions that are considered typical or expected within a particular society or cultural context.

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