If Economic Profits Are Earned in a Monopolistically Competitive Market

question 13

Multiple Choice

If economic profits are earned in a monopolistically competitive market,

• A)More firms will enter the market.
• B)The market supply curve will shift to the left.
• C)Price will rise.
• D)The market demand curve will shift to the right.

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Definitions:

Average Total Cost

The average total cost (ATC) is an economic concept that calculates the total cost of producing a good or service divided by the quantity of output produced. It is used to determine the per-unit cost of production.

Oligopoly

A market structure characterized by a few large firms dominating the industry, often leading to limited competition and potentially higher prices for consumers.

Purely Competitive

A market structure characterized by many buyers and sellers, homogenous products, free entry and exit, and no single participant having control over prices.

Average Total Cost

The total cost of production divided by the number of goods produced; a measurement of the cost of producing each unit.