Indicate whether each of the following statements is true or false and explain why.

4.4.1. A competitive firm that is incurring a loss should immediately cease operations.

(3)

4.4.2. A pure monopoly does not have to worry about suffering losses because it has

the power to earn normal profits. (3)

4.4.3. When P > AVC, the perfect competitive firm will always make a normal profit.

(3)

4.4.4. When a firm is able to set its price, its price will always be higher than its MR.

(3)

4.4.5. A monopoly will always earn economic profits because it is able to set any price

that it wants to. (3)