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

question 104

Multiple Choice

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 10.7 D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
According to Figure 10.7, which of the following statements is incorrect about the price P₁?

• A)The monopolist is maximizing profit at P_1.
• B)In the long run, firms will leave the perfectly competitive industry and force the price upward.
• C)The monopolist is earning normal profit at P_1.
• D)Both the firms maximize their profits at P_{1 .}
• E)The perfectly competitive firm would produce 10 units of output at P_1.

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Definitions:

Journal Format

A structured way of recording financial transactions in chronological order, typically used in bookkeeping and accounting.

Reference Column

A column in accounting journals where cross-references to ledger account numbers or other relevant documentation are noted.

T-Account

A T-account is a graphic representation of a general ledger account, used for teaching, analysis, and visualization, showing debits on one side and credits on the other.

General Ledger

A comprehensive set of accounts that records all transactions of a business, including assets, liabilities, equity, revenue, and expenses.