Question

Determine whether each of the following statements is true or false and explain why you think so.

a) In perfectly competitive market, the long-run supply curve is downward sloping in decreasing cost industry.

b) The marginal revenue for a perfectly competitive firm is equal to the market price. The marginal revenue for a monopolist is greater than the market price for positive quantities of output.

c) To calculate the Lerner Index for a particular firm, you need to know price and quantity of output for that firm.

d) Assume that the monopolist’s marginal cost is positive at all level of output. The monopolist always produces in the elastic region of the demand curve.

Answer 1

1: false

We know that in perfect competition the firm determines the profit level at MR=MC. The long run supply curve is downward sloping for the decreasing cost Industry in perfect competition.

2: true

We know that monopoly is market structure characterized by single seller of the product. So the marginal revenue is always positive for monopolist.

3: false

As we know the lerner index means measure of the market power of a firm. Formalized by the :

Formula=

^P-MC/_P

P= price of the good or products set by the firm

MC= marginal cost of frim

4: true

The monopolist always produces in the efficient or elastic portion of demand curve as MR>MC.

Kinldly comment for further explanation...if you need