A Monopolistically Competitive Firm Usually Charges Less Than a Monopoly

question 41

Multiple Choice

A monopolistically competitive firm usually charges less than a monopoly firm because

• A) it is part of a group of firms that has formally agreed to control the price and the output of a product.
• B) its primary goal is to reap monopoly profits by replacing competition with cooperation.
• C) producing homogenous output is more expensive than producing differentiated output.
• D) it faces some degree of competition due to low barriers to entry.
• E) it has a monopoly,but potential entrants exist in the form of contestable markets.

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Definitions:

Legal Entity

A legally recognized organization or individual that has rights, responsibilities, and can enter into contracts.

Owners

Individuals or entities that possess legal rights and claims to the assets of a business.

Monthly Salary Allowance

A fixed amount of money or compensations given on a monthly basis, often excluding any bonuses or additional pay.

Net Income

The total profit of a company after subtracting all expenses from revenues, also known as the bottom line.