Question

1.the profit maximizing monopolist would achieve loss minimization when... a.total cost equals total revenue. b.price is below average variable cost. c.price is above average total cost. d.price is between average total cost and average variable cost.

Answer 1

A monopolist minimizes losses by charging a price above the average total cost. In perfect competition, a firm maximizes profit or minimizes loss where price equals marginal cost and at the point where marginal cost intersects the average total cost at its minimum.

Step-by-step explanation:

The profit-maximizing monopolist achieves loss minimization when price is above average total cost (ATC). If the price that the firm is able to charge is below its average variable cost (AVC), it should shut down to minimize losses because it cannot even cover its variable costs. However, if the price is above AVC but below ATC, the firm should continue producing in the short run (since it covers variable costs and contributes to fixed costs) but plan to exit in the long run.

In the context of a perfectly competitive firm, this would translate to the firm producing at a quantity where price equals marginal cost (P=MC) to maximize profits or minimize losses. Specifically, losses are smallest when total revenue is closest to total costs. This aligns with the notion where the marginal cost curve intersects the average total cost curve at its minimum, known as the zero profit point.