Question

1.7 The vertical distance between the total cost and the total variable cost curves:

a) Decreases as output increases.

b) Increases as output increases.

c) Is equal to average fixed cost.

d) Is equal to total fixed cost.

1.8 Which one of the following is NOT true of a monopolist?

a) A monopolist is protected from competition.

b) A monopolist can earn economic profits.

c) A monopolist is a price maker.

d) A monopolist can sell as much as he/she wants to at any price.

1.9 If a firm in a perfectly competitive industry raises its price above market price:

a) Sales will fall slightly.

b) Sales will stay the same.

c) Sales will drop to zero.

d) All other firms in the industry will follow.

Answer 1

Answer
1.7)
option D
the total cost is the sum of total fixed cost and total variable cost
TC=FC+VC
FC=TC-VC
so the difference is total fixed cost

1.8)
Option d
The monopolist demand curve is downward sloping so if the monopolist increases price then loses the sales.
1.9
option C
the perfectly competitive market has many firms where the many means no one has the power to change the price and if it increases price then there is no sale because the demand curve is perfectly elastic and it can charge the price above the market price which is demand curve of the individual firm.