Question

Figure 16-10 The figure is drawn for a monopolistically-competitive firm. Price MC 160 ATC 12333 Demand 36.67 MR 100 133 33 15492 Quantity 34. Refer to Figure 16-10. In response to the situation represented by the figure, we would expect a. this firm's profit to move from its current value toward zero. b. some of the firms that are currently in the market to exit. c. the demand for this firm's product to increase, assuming this firm does not exit. d. All of the above are correct. 35. Economists normally assume that the goal of a firm is to eam (1) profits as large as possible, even if it means reducing output. (m) profits as large as possible, even if it means incurring a higher total cost. (ii) revenues as large as possible, even if it reduces profits. a. (i) and (ii) only b. (11) and (iii) only c. (). (ii), and (iii) d. (i) and (iii) only 36. Which of the following quotations illustrates the Tragedy of the Commons? 2. "A bird in the hand is worth two in the bush." b. "What is common to many is taken least care of, for all men have greater regard for what is their own than for what they possess in common with others. c. "Anyone who is not a socialist before he is 30 has no beart; anyone who is still a socialist after he is 30 has no head." d. "The only difference between the rich and other people is that the rich have more money."

Answer 1

Ans.34- (D)

Currently, profit maximizing price = 140 and profit maximizing quantity = 100. But ATC = 160. So, firm is incurring a loss. So, some firms will exit market in the long run reducing profits to 0 . And demand will increase due to reduction in price which will reduce due to reduction in supply.

Ans.35- (A)

Economists assume that firms want to maximize profits.

Ans.36- (B)