Exhibit 9-13 In the short run, the monopolist depicted in Exhibit 9-13 should A)shut down because P ATC at all output levels E)continue producing because monopolists never shut down

Question

Exhibit 9-13 In the short run, the monopolist depicted in Exhibit 9-13 should A)shut down because P < AVC at some output levels B)shut down because P < ATC at all output levels C)continue producing because P > AVC at some output levels D)continue producing because P > ATC at all output levels E)continue producing because monopolists never shut down

Quizplus · Accepted Answer

The monopolist should continue producing because it is able to cover its variable costs (AVC) at some output levels where P > AVC. However, it may not be able to cover its total costs (ATC) at all output levels, which is why option B is incorrect. Option A is also incorrect because the monopolist will only shut down if it cannot cover its variable costs at any output level. Option D is incorrect because the monopolist may still experience losses if it cannot cover its fixed costs, even if P > ATC. Option E is incorrect because monopolists may still shut down if they cannot cover their costs.

Exhibit 9-13 in the Short Run, the Monopolist Depicted