True or false questions about incurring loss and pure

Reference no: EM1312887

Indicate whether each of the following statements is true or false and explain why.

1. A competitive firm that is incurring loss should immediately stop all operations (production).

2. A pure monopoly does not have to worry about suffering losses because it has the power to set prices at any level of output it wants.

3. In the long run, firms operating as pure competitors and monopolistic competitors will both tend to earn normal profits.

4. Assuming a linear demand curve, a firm that wants to maximize its revenue will charge a lower price than a firm that wants to maximize its profits.

5. If P > AVC, a firm's total fixed cost will be greater than its loss.

6. When a firm is able to set its price, its price will always be less than its MR.

A monopoly will always earn economic profits because it is able to set any price that it wants to.

Reference no: EM1312887

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