This Graph Shows the Cost and Revenue Curves Faced by a Monopoly

question 36

Multiple Choice

This graph shows the cost and revenue curves faced by a monopoly.
According to the graph shown,if Q2 units are being produced,this monopolist:

• A)is earning negative profits.
• B)should cut back production to increase profits.
• C)is maximizing revenue.
• D)is maximizing profits.

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Definitions:

Long Run

A period in which all factors of production and costs are variable, allowing for full adjustment to changes in market conditions.

Average Total Cost Curve

A graphic representation showing the cost per unit of output produced, combining both fixed and variable costs.

Purely Competitive Firm

A firm that operates in a market where there are many buyers and sellers, all producing homogeneous products, leading to no single firm being able to influence market price.

Total Cost

The sum of all expenses, both fixed and variable, incurred in producing goods or services.