MrsSmith's Bakery Shop Is a Firm in Monopolistic Competition

question 27

Multiple Choice

Mrs.Smith's bakery shop is a firm in monopolistic competition.She is currently selling a box of bread for $16.The firm's marginal cost is $7 and marginal revenue is $7.To maximize economic profit Mrs.Smith

• A)shuts down.
• B)decreases output so that marginal revenue exceeds marginal cost.
• C)continues to produce the same level of output.
• D)increases output so that marginal cost exceeds marginal revenue.
• E)decreases output so that marginal cost equals the output price.

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Definitions:

Excise Duties

Taxes imposed on specific goods, such as tobacco and alcohol, often aimed at discouraging their use or generating revenue.

Tariffs

Taxes imposed on imported goods and services, intended to raise their price and protect domestic industries.

Trade Barriers

Restrictions imposed by a government on the importation or exportation of goods to protect domestic industries.

Mutual Economic Growth

a situation in which multiple parties or countries experience simultaneous increases in economic development and prosperity through cooperation or beneficial policies.