When a Market Is Monopolistically Competitive, the Typical Firm in the Market

question 98

Multiple Choice

When a market is monopolistically competitive, the typical firm in the market can earn

• A)losses in the short run and profits in the long run.
• B)profits in the short run and the long run.
• C)losses in the short run and zero profit in the long run.
• D)zero profit in the short run and losses in the long run.

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Definitions:

Profit Margin

A financial metric expressing the percentage of revenue that remains as profit after all expenses are deducted from gross sales.

Target Cost

The desired cost of producing a product, determined by subtracting a desired profit margin from a competitive market price, aimed at ensuring market competitiveness.

Traditional Costing Systems

Costing methods that assign manufacturing overhead to products based on a predetermined overhead rate, often using direct labor hours as the allocation base.

Design Costs

Expenses associated with the process of creating and developing a plan or specification for the production of objects or systems.