Problem
Explain why each of the following statements is false. Be thorough yet concise in your answer.
1. Consider a graph of typical cost curves for a firm. As output increases, the distance between average total cost and average variable cost increases.
2. When perfectly competitive firms make a profit, it encourages other firms to enter. Over the long-run, this entry causes the market demand curve to shift right, which increases marginal revenue for each firm. This entry continues until each firm is earning zero profit.
3. To maximize profit, a monopolist will produce and sell a quantity where MR = MC and then charge a price equal to MR.
The response should include a reference list. Double-space, using Times New Roman 12 pnt font, one-inch margins, and APA style of writing and citations.