Suppose a Monopolist Charges a Price Corresponding to the Intersection

question 127

Multiple Choice

Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:

• A) earn an economic profit.
• B) stay in operation in the short-run, but shut down in the long run if demand remains the same.
• C) shut down.
• D) none of the above.

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