Suppose Both a Monopolist and a Perfectly Competitive Firm Charge

question 39

Multiple Choice

Suppose both a monopolist and a perfectly competitive firm charge a price corresponding to the quantity at the intersection of the marginal cost and marginal revenue curves. If this price is between each firm's average variable cost and average total cost curves,

• A) the perfectly competitive firm will continue to operate in the short run but the monopolist will shut down.
• B) both firms will continue to operate in the short run.
• C) both firms will shut down in the short run.
• D) the perfectly competitive firm will continue to operate in spite of the loss but the monopolist will earn a profit.

---

Definitions:

Fully Rational Being

An entity capable of comprehensive reasoning, capable of making logically consistent decisions based on full information.

Morality

A system of values and principles that determine appropriate behavior, guiding individuals in distinguishing right from wrong based on societal, religious, or personal standards.

Hypothetical Imperative

A command of reason that applies only conditionally, suggesting an action to achieve a specific result, as posited by philosopher Immanuel Kant.

Categorical

Pertaining to absolute and unconditional statements or classifications.