Consider a Monopolistically Competitive Industry in Long-Run Equilibrium

question 108

Multiple Choice

Consider a monopolistically competitive industry in long-run equilibrium. Suppose there is a large increase in wages that raises the costs for all firms. What happens within each firm in the short run?

• A)They will be forced to close down due to the excess costs.
• B)They will continue producing as before, cushioned by their previous excess profits.
• C)They will expand output and try to make up for lost profits.
• D)They will lower prices and try to steal customers away from their rivals.
• E)They will decrease production and produce the quantity at which marginal revenue equals the new (higher)marginal cost curve; this means a rise in price.

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Definitions:

Work Stress

A form of stress that is caused by pressures or conflicts in a work environment, affecting an individual's mental and physical health.

Constructive Expression

The positive and effective communication of ideas, feelings, and opinions in a way that contributes to growth and understanding.

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The rules, guidelines, and procedures established by an organization to regulate its operations and behavior of its members.

Mum Effect

The phenomenon where individuals are reluctant to share bad news or negative feedback to avoid uncomfortable situations or reactions.