The sign of the elasticity computation is important because the value of the price elasticity can be negative or positive.

Suppose your firm has a U-shaped average variable cost curve and operates in a perfectly competitive market

If you produce where the product price (marginal revenue) equals average variable cost (on the upward sloping portion of the AVC curve), then your output will: A) exceed the profit-maximizing level of output. B) be smaller than the profit-maximizing level of output. C) equal the profit-maximizing level of output. D) generate zero economic profits.

It is important to understand oligopoly markets because:

a. although few real world markets are oligopolies, their existence raises interesting theoretical questions. b. oligopolies typically generate more deadweight loss than monopolies. c. oligopolies can generate a whole range of possible outcomes between monopoly and perfect competition. d. one can predict the market outcome exactly just by knowing the number of firms in the market.