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A profit-maximizing monopolist faces the following information: P = $4, ATC = 6, MR = $3, MC = $3. The firm should

   

Shut down
   

Decrease output
   

Increase output
   

Stay at its current level of output

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Related questions

At the profit maximizing level of output for a monopolist, P>MC and MR=MC. Why?
 

6. Power Printers Total Costs (per hour)

q TC

0 65

1 80

2 95

3 120

4 150

5 200

If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?

7. Which of the following is NOT true in a perfectly competitive market?

a. There is free entry and exit into the industry.

b. Each firm produces a differentiated product.

c. Each firm faces a perfectly elastic demand curve.

d. Price is equal to marginal revenue at every output level for the firm.

8. A perfectly competitive firm should always continue to operate in the short run as long as:

a. P < ATC at the rate of output where MR = MC.

b. P < AVC at the rate of output where MR = MC.

c. MR > AVC at the rate of output where MR = MC.

d. MR > AFC at the rate of output where MR = MC.

9. A firm that makes zero economic profits:

a. Must eventually go bankrupt.

b. Should shut down.

c. Incurs a loss, but should not shut down.

d. Covers all its costs, including a provision for normal profit.

10. A monopoly firm is different from a competitive firm in that:

A. There are many substitutes for the monopolist’s product whereas the competitive firm’s demand curve is perfectly elastic.

B. The monopolist’s demand curve is perfectly inelastic, whereas the competitive firm’s demand curve is perfectly elastic.

C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.

D. All of the above

16. At the current level of output, a firm faces the following situation: P> AC > MC > MR. On the basis of this information, we can conclude that: (A) This is a monopoly firm that is currently producing too much output to maximize profit. It should shut down in the long run. (B) This is a perfectly competitive firm that is currently producing too much output to maximize profit. It should shut down in the long run. (C) This is a monopoly firm that is currently producing too little output to maximize profit. It should shut down in the long run. (D) This is a perfectly competitive firm that is currently producing too little output to maximize profit. It should shut down in the long run. (E) This is a monopoly firm that is producing the profit-maximizing output. It should continue to do what it is doing. (F) This is a perfectly competitive firm that is producing the profit-maximizing output. It should continue to do what it is doing. (G) This is a monopoly firm that is currently producing too much output to maximize profit. It should not shut down in the long run (H) This is a perfectly competitive firm that is currently producing too much output to maximize profit. It should not shut down in the long run. (1) This is a monopoly firm that is currently producing too little output to maximize profit. It should not shut down in the long run. (J) This is a perfectly competitive firm that is currently producing too little output to maximize profit. It should not shut down in the long run.

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