In a Monopolistically Competitive Market

question 289

Multiple Choice

In a monopolistically competitive market,

• A)there are only a few sellers.
• B)each firm takes the price of its product as given.
• C)firms can enter or exit the market without restrictions.
• D)each firm produces a product that is essentially identical to the products of other firms in the market.

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Definitions:

Economic Profit

The profit a business makes after deducting both its explicit and implicit costs, not just its operational expenses.

Profit Maximizing

A process by which a firm determines the price and output level that returns the greatest profit.

Fixed Costs

Expenses that do not change with the level of production or sales, such as rent, salaries, or loan payments.

Short-Run Profit

The profit earned by a firm in the short term, typically considering only variable costs and fixed costs remaining constant.