Use the Figure Below to Answer the Following Questions

question 115

Multiple Choice

Use the figure below to answer the following questions.

Figure 14.2.3
-Refer to Figure 14.2.3. Assume this firm faces demand curve D₁. If this firm in monopolistic competition is maximizing profit,

• A)there will be entry of rival firms into the industry.
• B)rival firms will exit the industry.
• C)the market is efficient.
• D)this firm will exit the industry in the long run.
• E)its profit will rise over time.

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Definitions:

Foreign Competition

The presence and impact of competitors from other countries in a domestic market, often influencing prices, market shares, and industry standards.

Oligopolistic Market

A market structure characterized by a small number of large firms that dominate the market, often leading to strategic interactions and considerations regarding pricing and production.

Allocative Efficiency

A state of resource distribution where it is impossible to make any one individual better off without making someone else worse off, maximizing societal welfare.

Product Homogeneity

The degree to which products are identical or undifferentiated from each other in the eyes of the consumer.