If a Monopolistically Competitive Firm Is Producing the Profit-Maximizing Level

question 169

Multiple Choice

If a monopolistically competitive firm is producing the profit-maximizing level of output and is earning an economic profit in the short run:

• A)price is less than average total costs.
• B)price is less than marginal cost.
• C)marginal revenue is less than marginal cost.
• D)marginal revenue equals marginal cost.

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Definitions:

Accounts Receivable

Funds that customers owe to a company for products or services they have received but have not yet compensated for.

Inventory

The total amount of goods that a company holds, intending to sell them in the normal course of business.

Financing Activities

Transactions that result in changes in the size and composition of the equity capital or borrowings of a company.

Cash Flow

The total volume of financial transfers happening within a business, crucially affecting its ability to handle financial obligations.