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

question 102

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 economic profits.
• B) is earning positive economic profits.
• C) is earning zero economic profits.
• D) may be earning zero accounting profits.

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Definitions:

Industry Supply Curve

A graph that shows the relationship between the price of a good and the total output of the industry for that good.

Price Levels

The mean value of present prices for all goods and services created within the economy.

Output Levels

Refers to the quantity of goods or services produced by a firm or economy over a certain period of time.

Producer Surplus

The difference between what producers are willing to accept for a good or service and the higher market price they actually receive.