If a Permanent Drop in Demand Causes a Monopolist to Earn

question 148

Multiple Choice

If a permanent drop in demand causes a monopolist to earn below-normal profits in the long run,this monopolist

• A)will always exit the market in the long run
• B)will be forced by the government to continue operating in the long run
• C)may continue operating in order to avoid alienating its customers
• D)will exit the market in the long run only if it cannot cover its fixed costs
• E)will use limit pricing to reduce the size of its loss

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Definitions:

Short-Term Thinking

A focus or emphasis on immediate gains or results, often at the expense of long-term benefits.

Overconfidence

Overconfidence refers to an individual's unwarranted belief in their own abilities or the correctness of their judgement, often leading to mistakes or failures.

Nonprogrammed Decisions

Decisions made in response to unique, novel, or complex situations that require a custom-tailored approach.

Group Decisions

The outcome or resolution reached through a process of deliberation and discussion among members of a group.