which of the following statements is true of the oligopoly that can cover its varible costs and si in equilibrium?
a:p=mc=atc
b:p>mc
c:p>mr and p=mc
d:p<mc and mr=MC
and WHy
What is "si"?
Graph an oligopolist, facing a downward sloping demand curve. Draw in your marginal cost curve and your average variable cost curve that are consistent with your given assumptions. Find the optimal production point, and you will have your answer.
To determine which statement is true for an oligopoly that can cover its variable costs and is in equilibrium, we need to analyze the options provided.
a) p = MC = ATC: This statement suggests that the price (p) equals both the marginal cost (MC) and average total cost (ATC). In an equilibrium scenario, where the oligopoly is covering its variable costs, this statement would not typically hold true. The price would likely be higher than the variable costs in order to cover fixed costs as well.
b) p > MC: This statement implies that the price (p) exceeds the marginal cost (MC). This is a plausible condition for an oligopoly in equilibrium that can cover its variable costs. By setting the price higher than the marginal cost, the oligopoly would generate enough revenue to cover not only variable costs but also fixed costs.
c) p > MR and p = MC: This statement suggests that the price (p) exceeds the marginal revenue (MR) and is equal to the marginal cost (MC). This condition will likely not result in an equilibrium for the oligopoly since MR must equal MC for profit maximization, not price. Thus, this statement is unlikely to be true for an oligopoly in equilibrium.
d) p < MC and MR = MC: This statement implies that the price (p) is lower than the marginal cost (MC) and that marginal revenue (MR) is equal to MC. This condition is not consistent with an oligopoly in equilibrium as the price should be higher than the marginal cost to ensure a profit. Therefore, this statement is also likely to be false.
Now, let's assume you have a downward sloping demand curve and draw in the marginal cost (MC) and average variable cost (AVC) curves consistent with the given assumptions. To find the optimal production point, we need to identify where the MC curve intersects the demand curve. At this point, the oligopoly would maximize its profit and determine the price accordingly.
Overall, among the given options, statement b) (p > MC) is likely to be true for an oligopoly that can cover its variable costs and is in equilibrium.