Suppose a Monopolistically Competitive Firm Can Increase Its Profits by Decreasing

question 154

Multiple Choice

Suppose a monopolistically competitive firm can increase its profits by decreasing its output.At the current output:

• A)marginal revenue is less than zero.
• B)price is less than marginal revenue.
• C)marginal revenue is less than marginal cost.
• D)price is less than average total cost.

Calculate equivalent variation in income due to a price change and understand its economic implications.

Derive and interpret consumer surplus from demand functions.

Analyze the impact of price changes on consumer choices and welfare using compensating and equivalent variations.

Apply the concept of indirect utility to solve optimization problems in consumer theory.

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