GENERAL KNOWLEDGE

IF A MONOPOLIST IS INCURRING SHORT-RUN LOSSES, THIS MEANS THAT HIS

  • A. selling price is above the short-run marginal cost
  • B. selling price is below the short-run marginal cost ✓
  • C. average revenue is greater than marginal revenue
  • D. average revenue is less than marginal revenue

 

The answer to the question is: B. selling price is below the short-run marginal cost

If a monopolist is incurring short-run losses, it means that the selling price is below the short-run marginal cost. This is because in the short run, a monopolist may not be able to adjust its production levels to minimize losses. Therefore, if the selling price is below the short-run marginal cost, the monopolist will incur losses as its revenue from selling goods is not sufficient to cover the variable costs of production.

In a monopolistic market structure, the monopolist has control over the supply of a particular product or service and can influence the market price by adjusting its output. In the short run, a monopolist may face a situation where its total revenue is less than its total variable costs, leading to losses. This occurs when the selling price of the product is lower than the short-run marginal cost of production.

Incurring short-run losses indicates that the selling price is insufficient to cover the short-run marginal cost of production, resulting in a loss for the monopolist.

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