You own a monopolistic fir such as a fast food joint. You realize your firm is...
You own a monopolistic fir such as a fast food joint. You realize your firm is making a loss if
A. Price is greater than than the average total cost.
b. Price is less than the average total cost.
c. Price is equal to the average total cost.
d. Both a and b
Homework Answers
When price is less than the average total cost, the firm incurs economic losses. Therefore, a firm most often shuts down if it realises that the price is less than average total cost thereby leading to economic losses.
If price is greater than average total cost then the firm is earning economic profit .
In the above case:
Answer - price is less than the average total cost.
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