Asked by Kendall Messerole on Jun 24, 2024
Verified
A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, MR = $3, and AVC = $2.50. This firm is realizing
A) an economic loss that could be reduced by producing more output.
B) an economic loss that could be reduced by producing less output.
C) an economic profit that could be increased by producing more output.
D) an economic profit that could be increased by producing less output.
Economic Profit
The difference between total revenue and the total costs, including both explicit and implicit costs.
Pure Monopolist
A market structure in which a single company or entity has exclusive control over the production and sale of a particular product or service, with no close substitutes.
- Identify the circumstances in which a monopolist must adjust their production levels upwards or downwards to optimize earnings.
Verified Answer
SR
skylar robinsonJun 29, 2024
Final Answer :
C
Explanation :
Since P > ATC, the firm is making an economic profit. To increase profit, it should produce more until MR = MC.
Learning Objectives
- Identify the circumstances in which a monopolist must adjust their production levels upwards or downwards to optimize earnings.
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