Essay: Answers on Economics

Sample Essay

1)False that is not true since profits are maximized at the point where MC=MR or in the case of perfect competition, where P=MC

2)True this happens to be true since the demand curve shows the highest process that the consumer is willing to pay and on the downward sloping demand curve, the price is greater than the marginal revenue. In the optimal positions, the monopolist position where the marginal revenue is equivalent to the marginal cost and the price that the monopolist gets from the consumer is the maximum one that the customer would e willing to pay.

3)False: the lowest point on the short run supply curve is where the AVC intersects the MC and not the total ATC.

4)True: as the marginal cost is below average cost when it is falling and above it when it is rising.

5)False: this statement goes against the definition of what an oligopoly stands for as it is a market structure in which there are few large firms which are not selling identical products but rather similar products which are branded and there are significant entry barriers into the market which result in those firms making supernormal profits in the short run.

6)True: that is the definition of a shortage as the lower price would result in greater demand but at the same time there would be incentive for the producers to supply greater quantities

And hence, the shortage would be created.

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