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.

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Definitions:

Workbook Problems

Exercises or assignments found in a workbook designed to practice or assess understanding of a subject or topic.

Comparative Advantage

An economic theory that explains how and why it benefits countries to specialize in producing goods in which they have a lower opportunity cost and to trade with others.

Constant Returns to Scale

A situation in production where increasing all inputs by a certain factor results in output increasing by the same factor.

Competitive Equilibrium

A market state where supply equals demand, resulting in an efficient distribution of goods and services without excess.