A Monopolist Faces a Downward-Sloping Demand Curve and Has Fixed

question 56

Multiple Choice

A monopolist faces a downward-sloping demand curve and has fixed costs so large that when she maximizes profits with a positive amount of output, she earns exactly zero profits.At this positive, profit-maximizing output,

• A)there are decreasing returns to scale.
• B)demand is price inelastic.
• C)marginal revenue is greater than marginal cost.
• D)price equals marginal cost.
• E)average total cost is greater than marginal cost.

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Definitions:

Projects

Specific tasks or endeavors undertaken by individuals or organizations to achieve particular goals, often involving a series of planned actions or steps.

Payback

Payback period refers to the time it takes for an investment to generate enough cash flow to recover its initial cost.

Profitability Index

is a capital budgeting tool that measures the relationship between the present value of cash flows and the initial investment, indicating the value created per dollar invested.

Discount Rate

The interest rate used to discount future cash flows of a financial instrument to their present value, determining the potential investment's value.