In Theory, in the Long Run, Monopolistically Competitive Firms Earns

question 20

Multiple Choice

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?

• A) gradually increase the mark-up on the goods produced
• B) lower the price of its products to expand its market share
• C) identify new markets and develop products precisely for those markets
• D) find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

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Definitions:

Horizontal Integration

A strategy where a company acquires or merges with its competitors to increase its market share or product offerings.

Adaptive Framework

A flexible structure or system designed to accommodate change and enable adjustments in response to new conditions or challenges.

Prospector Strategy

A business strategy that focuses on innovation, exploring new markets, and seeking out new opportunities, often characterized by a willingness to take risks.

Innovation

The process of creating new ideas, products, or methods, which bring about significant positive change or improvement.