Answer the following multiple choice questions.
The above diagram shows a Monopoly that is incurring an economic loss. The Monopoly is in equilibrium at point E where MC=MR. The profit maximising output is Q. The price charged is determined by the corresponding point on the demand curve. The price charged is P. In the above diagram we can see that at the profit maximising output, the demand curve lies above the average variable cost( AVC) curve but below the average total cost( ATC) curve indicating that the price charged is sufficient to cover all the variable costs but not all costs. Hence the firm is incurring losses. The average total cost is S. The firm is incurring losses equal to the shaded area i.e., the portion PRMS.
Get Answers For Free
Most questions answered within 1 hours.