When a Firm's Demand Curve Is Tangent to Its Average

question 137

Multiple Choice

When a firm's demand curve is tangent to its average total cost curve:

• A) the firm must be operating in a monopolistically competitive market.
• B) economic profits are zero.
• C) the firm must be earning economic profits.
• D) the firm must be incurring economic losses.

---

Definitions:

Dominant Strategy

A strategy in game theory that is best for a player regardless of the strategies chosen by the other players.

Economic Profit

The disparity between total income and the sum of all expenses, encompassing direct and indirect costs.

Monopoly

A market structure characterized by a single seller, selling a unique product in the market with no close substitutes, thereby controlling the entire market supply.

Dominant Strategy

A strategy that yields the best outcome for a player, regardless of the strategies chosen by other players in a game.