a monopolistic firm will shut down if?
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The monopoly firm. ... Shutdown rule – the firm will shut down if the average revenue is lower than the average cost at all output levels, so as the price equals average revenue, it will shut down if the price is lower than the average total cost at all levels.
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In the short run, if the price is less than average total cost, then firms in this perfectly competitive industry earn negative economic profit. These negative economic profits will lead some firms to exit the industry in the long run until the firms remaining in the industry earn zero economic profits.
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The monopolistic competitive firm maximizes profits where marginal revenue equals marginal cost. A monopolistic competitive firm's demand curve is downward sloping, which means it will charge a price that exceeds marginal costs.
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In monopolistic competition, a firm takes the prices charged by its rivals as given and ignores the impact of its own prices on the prices of other firms. In the presence of coercive government, monopolistic competition will fall into government-granted monopoly.
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In the short run, a firm that is maximizing its profits will: Increase production if the marginal cost is less than the marginal revenue. Decrease production if marginal cost is greater than marginal revenue. Continue producing if average variable cost is less than price per unit.
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In maximizing profit a firm will always produce that output where total revenues are at a maximum. In the short run a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.
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In the case of a natural monopoly, market competition will not work well and so, rather than allowing an unregulated monopoly to raise price and reduce output, the government may wish to regulate price and/or output.
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According to information in BBB files, this business is no longer in business.
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Setting a Price and Determining Profit Also like a monopoly, a monopolistic competitive firm will maximize its profits by producing goods to the point where its marginal revenues equals its marginal costs. ... Second, the firm will only be able to break even in the long-run; it will not be able to earn an economic profit.
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A perfectly competitive firm must decide what price to charge for its goods. 16. If it does not shut down, to maximize its profit a perfectly competitive firm produces the level of output that sets MR = MC.
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Company directors who want a company struck off the register (also known as a company being dissolved) want to have a company marked down as non-existent and still retain full control of the business. Dissolution is usually voluntary by the members (shareholders) if they have no further use for the company.
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If the price is exactly at the zero-profit point, then the firm is making zero profits. If price falls in the zone between the shutdown point and the zero-profit point, then the firm is making losses but will continue to operate in the short run, since it is covering its variable costs.
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When firms in a competitive market are incurring an economic loss, some of the firms will exit the market. As these firms exit, the supply decreases and the price rises. The rise in the price eventually eliminates the economic loss, at which time exit stops.
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Conventionally stated, the shutdown rule is: "in the short run a firm should continue to operate if price equals or exceeds average variable costs." Restated, the rule is that to produce in the short run a firm must earn sufficient revenue to cover its variable costs.
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Anti-trust laws prevent monopolies from being formed, which encourages businesses to offer quality services at reduced rates in order to compete with one another. Anti-trust laws help to protect consumers. ... In addition, consumers are often offered reduced rates when a business has competition in the area.
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The firm's demand curve, which is a horizontal line at the market price, is also its marginal revenue curve. But a monopoly firm can sell an additional unit only by lowering the price. That fact complicates the relationship between the monopoly's demand curve and its marginal revenue.
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If the price that a firm charges is higher than its average cost of production for that quantity produced, then the firm will earn profits. Conversely, if the price that a firm charges is lower than its average cost of production, the firm will suffer losses.