Suppose That at an Output of 1, 000 Units, a Monopolist

question 64

Multiple Choice

Suppose that at an output of 1, 000 units, a monopolist has marginal cost of $40, marginal revenue of $30, average variable cost of $30, and average total cost of $50.In order to maximize profit or minimize loss in the short run, the firm should

• A)shut down
• B)continue to produce 1, 000 units
• C)produce fewer than 1, 000 units but still operate
• D)produce more than 1, 000 units
• E)increase its plant size to gain economies of scale

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Definitions:

Neoclassical Economics

An economic theory that focuses on how the perception of utility and costs influence the supply and demand equilibrium.

Complementary

Products or services that enhance or are used together with another, increasing the value or usability of either.

Self-interest

The pursuit of personal advantage and well-being, often driving economic decisions.

Neoclassical Models

Economic theories and models that focus on the determination of prices, outputs, and income distributions in markets through supply and demand, often under the assumption of rational behavior and efficient markets.