Examining the Cost,revenue,and Demand Curves for a Monopolistic Competitor Reveals

question 14

Multiple Choice

Examining the cost,revenue,and demand curves for a monopolistic competitor reveals that,at optimal output,the demand curve lies above the average total cost curve.Which of the following is true?

• A) There is economic profit in the long run.
• B) There is an economic loss in the long run.
• C) Firms will enter the industry in the long run.
• D) Firms will exit the industry in the long run.
• E) There is not enough information because demand is an imperfect benchmark for measuring profitability.

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Definitions:

Automobile Manufacturer

A company that produces and sells cars, trucks, and other vehicles, often focusing on both the design and assembly of automobile parts and complete vehicles.

Variable Cost

Expenditures that change in line with production or sales quantities, notably labor and materials.

Mixed Cost

A cost consisting of both fixed and variable components, changing in total with the level of activity but remaining constant on a per unit basis only up to a certain level of activity.

Activity

A measure of actions or operations within a process, often used to allocate costs in activity-based costing.