A monopoly shuts down in the short run if AVC>P, and it shuts down in the long run if ATC>P.
'''7. Sharon has to pay $10.50 to hire nine workers, and must increase the wage to $11 to hire a tenth worker. But the tenth worker will bring in $13 extra to the firm’s firm's revenue. Does Sharon hire the tenth worker?'''
No, because the marginal factor cost of hiring the tenth employee is $11 for that worker, and also $.50 times 9 to increase the wages of all the other workers. This totals $15.50, which is greater than the $13 in additional revenue. Sharon would lose money by doing this, so she should not do it.
[[Category:Economics lectures]]
{{DEFAULTSORT: Economics Model Answers 11}}