If All Firms in a Monopolistic Competitive Industry Have Demand

question 29

Multiple Choice

If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:

• A) a number of new firms will enter the industry.
• B) some firms will leave the industry.
• C) firms in the industry earn zero economic profits.
• D) all firms will leave the industry.

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Definitions:

Workmanship

The degree of skill with which a product is made or a job is done, reflecting quality and attention to detail.

Breakeven Point

The point at which total costs and total revenues are equal, resulting in no net loss or gain for the business.

Variable Costs

Expenses that change in proportion to the activity of a business, such as costs for raw materials or production.

Fixed Costs

Expenses that do not vary with the level of production or business activity within a certain range.