The Diagram Below Shows Demand and Cost Curves for a Monopolistically

question 9

Multiple Choice

The diagram below shows demand and cost curves for a monopolistically competitive firm.
FIGURE 11-3
-Refer to Figure 11-3.If an increase in industry demand led to an outward shift in each firmʹs demand curve,and no change to the firmʹs costs,the typical firm would

• A)be making profits and new firms would enter the industry in the long run.
• B)be making losses and some firms would exit the industry in the long run.
• C)would expand its output in the long run.
• D)increase costs in order to break even at P1 and Q1 in the long run.
• E)decrease costs in order to break even at P1 and Q1 in the long run.

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Definitions:

Special Order

A one-time customer order often involving a large quantity and requiring a separate pricing or product specification arrangement.

Special Order Price

The price charged for a product or service that is outside the company's normal scope of work or products; often tailored pricing for a specific customer request.

Variable Costing

A costing method that includes only variable production costs—direct materials, direct labor, and variable manufacturing overhead—in product cost calculation, contrasting with absorption costing that also includes fixed costs.

Product Costs

Costs that are incurred to create a product that is intended for sale to customers. This includes direct materials, direct labor, and manufacturing overhead.