A monopolistically competitive firm is currently charging a price of $20 and producing 3,000 units/month. It faces monthly fixed costs of $1,000 and has an average variable cost of $22/unit. We would expect:
a. The firm to earn an economic profit in the long run
b. The firm to shut down in the short run
c. The firm to raise its price to cover its variable costs
d. The firm to adjust its production to minimum efficient scale
b
You might also like to view...
In 2008, several of the world's central bank actively worked together to push down global interest rates. This is an example of
A) international policy coordination. B) international policy cooperation. C) international policy externalities. D) structural interdependence.
Monopolistic competition does not display allocative efficiency in either the short run or the long run
a. True b. False Indicate whether the statement is true or false
P-TV and QRS-TV are trying to decide whether to air a sitcom or a reality show in a given time slot. Viewers like both sitcoms and reality shows, but sitcoms are more expensive to produce than reality shows since real actors need to be hired. QRS-TV makes its decision first, and then P-TV observes that choice before making its decision. Both stations know all of the information in the decision tree below.
Suppose QRS-TV enters into an agreement with P-TV that gives QRS-TV the exclusive right to air a reality show during this time slot. QRS-TV would be willing to pay P-TV ________ in order to persuade P-TV to enter into this agreement.
A. more than $10 million B. nothing C. no more than $5 million D. no more than $10 million
Defining the "relevant market" involves looking at two components. They are
A. the goods market and the services market. B. the competitive market and the dominant market. C. the local market and the national market. D. the geographic market and the product market.