When Comparing a Monopoly Firm and a Competitive Firm in the Long

question 97

Multiple Choice

When comparing a monopoly firm and a competitive firm in the long run,which of the following statements is not correct?

• A)A monopoly firm does not need to produce output at the lowest possible cost but a competitive firm must.
• B)A monopoly firm earns economic profit at its profit-maximizing level of output but a competitive firm does not.
• C)A monopoly firm operates at the minimum point on its average cost curve but a competitive firm does not.
• D)A monopoly firm will produce more than the efficient level of output but a competitive firm will always produce the efficient level of output.

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Definitions:

Capacity

The maximum level of output that a company can sustain to produce in a given period under normal circumstances.

Sunk Costs

Sunk costs are past expenses that have already been incurred and cannot be recovered, and thus should not affect future business decisions.

Opportunity Costs

The loss of potential gain from other alternatives when one alternative is chosen.

Cost Accounting System

A framework used to record, analyze, and allocate costs associated with a company's operations and production processes.