The Following Figures Show the Demand and Cost Curves of a Perfectly

question 102

Multiple Choice

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
-Why does an efficiency loss arise under monopoly rather than under perfect competition?

• A)A monopolist charges a lower price for the product to gain market entry.
• B)A monopolist sells a lesser quantity at a higher price.
• C)There is a net increase in consumer surplus but a net decline in producer surplus.
• D)There is an increase in producer surplus, consumer surplus remaining unchanged.
• E)A monopolist sells a greater quantity than a perfect competitor.

Analyze the effect of price elasticity of demand and supply on the burden of a tax.

Calculate the tax burden on buyers and sellers in a market.

Determine the price paid by buyers and received by sellers after the imposition of a tax.

Describe the effects of a price floor and a price ceiling on market equilibrium.

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Definitions:

Debt to Equity

A financial metric showing the comparative amount of debt and shareholders' equity utilized to fund a company's assets.

Price/Earnings

A valuation ratio of a company's current share price compared to its per-share earnings, used to assess if a stock is over or undervalued.

Ratio Analysis

A technique of analyzing the strength of a company by forming (financial) ratios out of sets of numbers from the financial statements. Ratios are compared with the competition, recent history, and the firm’s plan to assess the quality of its performance.

Stable Company

Refers to a firm with consistent performance, low volatility in its stock price, and predictable financial returns, making it a less risky investment.