Author Question: Which of the following is likely in a monopolized market? a. a price that exceeds marginal cost b. ... (Read 40 times)

RODY.ELKHALIL · **on:** Jun 30, 2018

Which of the following is likely in a monopolized market?
a. a price that exceeds marginal cost
b. a price that exceeds marginal revenue
c. a welfare loss due to the restriction of output
d. all of the above

Question 2

Discuss the relation between average variable cost (AVC) and marginal cost (MC) curves.

karlss · **Reply #1 on:** Jun 30, 2018

Answer to Question 1

d

Answer to Question 2

The AVC and the MC curves depict an important relationship. At outputs less than the minimum of average variable cost (i.e., where the AVC curve is falling) marginal cost is less than average variable cost. Similarly, where the AVC curve is rising marginal cost is greater than average variable cost. Finally, if average variable cost is constant (as occurs near the minimum of AVC), it equals marginal cost. However, the reverse implications are not necessarily trueimmediately to the left of the minimum of AVC, MC is below it but the marginal cost curve itself is rising.