Q 3. Evaluate the following statements whether they are true or false. Justify your answer with an
appropriate reason. (Draw a graph if it is necessary). [12 Marks]
a) The long run equilibrium condition for the competitive firm is P = LRAC = MR = MC.
b) If the total cost function is given by TC = 10,000 +10Q +85 Q2
, the associated total
fixed cost and total variable functions are given by: TFC = 10,000 and TVC =10Q +85
Q
2
respectively.
c) A monopolistically competitive firm cannot successfully maintain positive economic
profits in the long-run
d) Under kinked demand theory the prices of oligopolists are predicted to be rather rigid
or 'sticky'.
e) A firm not having the ability to influence the price of its goods and services and having
to accept the equilibrium price in the market of that good is a price taker.
f) For a monopoly producing a certain amount of output, price is less than marginal
revenue.
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