Explain why a monopolistically competitive firm would not want to reduce its price all the way to its minimum average total cost even though doing so would allow it to increase sales?
What will be an ideal response?
Maximizing sales is not the goal of any firm but rather profit maximization. Since the monopolistically competitive firm faces a down-sloping demand and marginal revenue curves its decision to sell and produce at the point where marginal revenue equals to marginal cost is likely to occur at a point higher than its minimum average total cost. To reduce price any further would result in a reduction in profits or an increase in losses.
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A good or service with a positive externality is one which ______
A. everyone wants to have access to B. is produced in the social interest C. the marginal social benefit exceeds the marginal private benefit D. the marginal external benefit exceeds the marginal private benefit
If total planned expenditures exceed real GDP, the economy will contract, causing production of goods and services to decrease and unplanned inventories to rise
a. True b. False Indicate whether the statement is true or false
Average fixed cost is measured by
a. AVC + ATC b. TFC/TC c. AVC – ATC d. TFC/Q e. TC – VC
Which of the following is a gain from trade?
A. A higher price level for all trading countries. B. A shorter workweek for all trading countries. C. A level of self-sufficiency for all trading countries. D. A higher standard of living for all trading countries.