If a Pure Monopolist Is Producing at That Output Where

question 200

Multiple Choice

If a pure monopolist is producing at that output where P = ATC, then

• A) its economic profits will be zero.
• B) it will be realizing losses.
• C) it will be producing less than the profit-maximizing level of output.
• D) it will be realizing an economic profit.

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Definitions:

Economic Profit

The separation between whole income and all charges, factoring in both straightforward and subtle costs.

Excess Capacity

The situation where a firm is producing less than the maximum output due to lack of demand.

Profit-Maximizing Rule

A principle stating that profit maximization occurs when a firm's marginal cost equals its marginal revenue.

Perfectly Competitive

Describes a market structure where many firms sell identical products, there are no barriers to entry or exit, and all firms are price takers.