Figure 15-1Refer to Figure 15-1. Which of the following statements about the firm depicted in the diagram is true? The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits. The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. The graph illustrates the relationship between price, cost, and quantity in a market. It features four main curves: Demand, Marginal Revenue (MR), Marginal Cost (MC), and Average Total Cost (ATC).1. **Axes**: - The vertical axis represents the price and cost per unit, ranging from $0 to $95. - The horizontal axis represents the quantity, ranging from 0 to approximately 2,204 units.2. **Curves**: - **Demand Curve**: This downward-sloping curve indicates that as the price per unit decreases, the quantity demanded increases. - **Marginal Revenue (MR) Curve**: Also downward-sloping, but steeper than the demand curve, reflecting that the marginal revenue decreases faster than the price. - **Marginal Cost (MC) Curve**: This upward-sloping curve shows the cost of producing one more unit. Where the MC curve intersects the MR curve determines the profit-maximizing quantity. - **Average Total Cost (ATC) Curve**: This U-shaped curve indicates the average cost per unit at different levels of production.3. **Intersection Points**: - The intersection of the MC and MR curves represents the point where the company maximizes profit by producing at this quantity. - The ATC curve intersects with the MC curve at its lowest point, indicating the most cost-efficient level of production.Overall, the graph provides insights into pricing and production decisions, highlighting how costs and revenues interact in the context of economic theory.

A monopoly firm is the sole seller of a product without any close substitutes.

Answered: Refer to Figure 15-1. Which of the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Figure 15-1

Refer to Figure 15-1. Which of the following statements about the firm depicted in the diagram is true?

The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises.

The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximizes its profits.

The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises.

The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises.

The graph illustrates the relationship between price, cost, and quantity in a market. It features four main curves: Demand, Marginal Revenue (MR), Marginal Cost (MC), and Average Total Cost (ATC).

1. **Axes**:
- The vertical axis represents the price and cost per unit, ranging from $0 to $95.
- The horizontal axis represents the quantity, ranging from 0 to approximately 2,204 units.

2. **Curves**:
- **Demand Curve**: This downward-sloping curve indicates that as the price per unit decreases, the quantity demanded increases.
- **Marginal Revenue (MR) Curve**: Also downward-sloping, but steeper than the demand curve, reflecting that the marginal revenue decreases faster than the price.
- **Marginal Cost (MC) Curve**: This upward-sloping curve shows the cost of producing one more unit. Where the MC curve intersects the MR curve determines the profit-maximizing quantity.
- **Average Total Cost (ATC) Curve**: This U-shaped curve indicates the average cost per unit at different levels of production.

3. **Intersection Points**:
- The intersection of the MC and MR curves represents the point where the company maximizes profit by producing at this quantity.
- The ATC curve intersects with the MC curve at its lowest point, indicating the most cost-efficient level of production.

Overall, the graph provides insights into pricing and production decisions, highlighting how costs and revenues interact in the context of economic theory.

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