Suppose You Observe That Output in an Industry Occurs on the Inelastic

question 37

Multiple Choice

Suppose you observe that output in an industry occurs on the inelastic part of the market demand curve.Which of the following can you conclude from this?

• A)The industry is definitely behaving as a monopoly that is protected by barriers to entry.
• B)The industry is definitely not behaving as a monopoly that is protected by barriers to entry.
• C)The industry could be perfectly competitive.
• D)The industry is definitely not perfectly competitive.
• E)Both (a) and (d)
• F)Both (b) and (c)
• G)Both (b) and (d)
• H)None of the above

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Definitions:

Economies Of Scale

Cost advantages reaped by companies when production becomes efficient, leading to a decrease in the per-unit cost as output increases.

Diseconomies Of Scale

The situation when a firm's costs per unit increase as it produces more output, opposite of economies of scale.

ATC Curve

A graphical representation of the average total costs of production at different levels of output in economics.

AVC Curve

The average variable cost curve, which shows a firm's average variable costs of production at different levels of output.