The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

-If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost, in the short run the monopolist will:
A)be forced to shut down to minimize the cost.
B)operate at a loss.
C)operate at an economic profit.
D)operate at a normal profit.
E)go out of business.

Question

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4
 
-If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost, in the short run the monopolist will:
A)be forced to shut down to minimize the cost. 
B)operate at a loss. 
C)operate at an economic profit. 
D)operate at a normal profit. 
E)go out of business.

Quizplus · Accepted Answer

If the monopolist's price is greater than the average variable cost but less than the average total cost, the firm is making a loss in the short run, but it is still covering all its variable costs. As the firm does not have any fixed cost, it will continue to operate in the short run, even though it is making a loss. Therefore, the best choice is B, operate at a loss.

The Table Given Below Shows the Price, Marginal Revenue and Marginal