One Prediction About Monopolistic Competition Is That It Has Higher

question 6

Multiple Choice

One prediction about monopolistic competition is that it has higher unit costs than perfect competition. But it is unreasonable to conclude that monopolistic competition is therefore bad for consumers because

• A) consumers benefit from products becoming more homogeneous.
• B) consumers benefit from lower prices.
• C) consumers benefit from an increased variety of products.
• D) consumers benefit because of an increase in quantity available.
• E) higher production costs means more employment.

---

Definitions:

Net Income

The total revenue minus total expenses, indicating the profitability of a company over a specific period.

Contribution Margin Ratio

The ratio of Contribution Margin to Sales Revenue, measuring the percentage of each sales dollar available to cover fixed costs and profit.

Fixed Costs

Unvarying costs that do not fluctuate with changes in production or sales levels, such as office rent, staff wages, and insurance coverage.

Break-Even Point

The point where the amount produced or sold matches the overall expenses, leading to neither a profit nor a loss.