The Cross-Price Elasticity of Demand for the Products of Monopolistically

question 48

Multiple Choice

The cross-price elasticity of demand for the products of monopolistically competitive firms is

• A)Very high.
• B)Low.
• C)An indication that most of the products are complementary goods.
• D)The same as in perfect competition.

---

Definitions:

Accounting Profits

The net income of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues, according to standard accounting practices.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price taking behavior.

Long-Run Equilibrium

A state in which all factors of production and costs are variable, allowing firms to enter and exit the market, and no economic forces are pushing for change.

Efficient Scale

The level of production at which a company or industry can produce its products at the lowest average cost, optimizing resource use.