If There Are Low Barriers to Entry, a Monopolist

question 52

Multiple Choice

If there are low barriers to entry, a monopolist

• A)might undertake investment to lower marginal cost in the face of a potential rival.
• B)will undertake investment to lower marginal cost in order to increase profits.
• C)will not undertake investment to lower marginal cost under any circumstances because profits are lower.
• D)Both A and B.

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Definitions:

Average Total

The sum of all the costs of production (fixed and variable) divided by the total quantity produced; often referred to as average total cost.

Marginal Cost Curve

A graphical representation showing how the marginal cost varies with the quantity of output produced, typically U-shaped due to economies and diseconomies of scale.

Average Fixed Cost Curve

A graphical representation depicting how the average fixed costs of production change with different output levels.

Average Total Cost

The total cost of production (fixed and variable costs combined) divided by the number of units produced, indicating the cost per unit of output.