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Suppose a Monopoly has a High Fixed Cost= 0.5 and VC=0 .
The Profit Max O/t : Q=1 But the Profit = -0.13 (which is < 0)

which means -0.13 > -0.5

Should the Firm Produce produce Q=1 or Q=0 ?


Soln.

I am confused here. The answer says Q=0 ,but doesn't it make sense to produce 1 Q and sell it and offset it to the fixed cost.But if it produces Q=0 it will still have a sunk cost of -0.5.

There is no mention of LR & SR in the question ,so I suppose its talking about LR .

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  • $\begingroup$ Could you please post the question exactly as it was originally posed? Your version is not very clear. $\endgroup$
    – smcc
    Nov 11, 2023 at 18:01

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