Assume a Monopolist's Marginal Cost and Marginal Revenue Curves Intersect

question 72

Multiple Choice

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will

• A) make an economic profit.
• B) stay in operation in the short run, but shut down in the long run.
• C) shut down in the short run.
• D) lower the price.

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Definitions:

Total Cost

The complete amount of money spent or investment made in acquiring an asset, including all associated expenses and fees.

Fixed Costs

Expenses that remain consistent regardless of production or sales volume, including rent, salaries, and insurance premiums.

Variable Costs

Expenses that vary depending on the amount of products or services a company generates.

Industry Life Cycle

A concept describing the stages of growth, maturity, and decline that industries experience over time.