Suppose That Firms in a Monopolistically Competitive Industry Are Earning

question 167

Multiple Choice

Suppose that firms in a monopolistically competitive industry are earning short-run economic profits.In the long run, the demand curve facing each individual firm can be expected to

• A)shift to the left and become flatter
• B)shift to the left and become steeper
• C)shift to the right and become flatter
• D)shift to the right and become steeper
• E)remain constant

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Definitions:

Luxury Good

A good for which demand increases more than proportionally as income rises, in contrast to a "necessity good," for which demand is not related to income.

Total Revenue

The total amount of money a company receives from its sales of goods or services, calculated by multiplying the price per unit by the number of units sold.

Demand Elastic

Referring to a situation where the quantity demanded of a good or service significantly changes in response to a change in its price.

Price-Elasticity Coefficient

A numeric value that measures how much the quantity demanded of a good responds to a change in the price of that good, indicative of its price sensitivity.