The Fact That Monopolistically Competitive Firms Charge a Price That

question 93

Multiple Choice

The fact that monopolistically competitive firms charge a price that exceeds marginal cost is responsible for the

• A)business-stealing externality that is observed in monopolistically competitive markets.
• B)product-variety externality that is observed in monopolistically competitive markets.
• C)inefficiencies of the long-term losses earned by monopolistically competitive firms.
• D)persistence of positive profits into the long run for monopolistically competitive firms.

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Definitions:

Option Contract

A financial contract that allows the purchaser the option, without any compulsory enforcement, to purchase or dispose of a base asset at an agreed-upon price, either on or prior to a predetermined date.

Exercise Price

The rate at which an option contract's holder has the right to purchase (for a call option) or dispose of (for a put option) the fundamental asset.

Strike Price

The predetermined price at which a call option can be purchased or a put option can be sold upon exercise.

Debt

Money that is owed or due to be paid to someone else, typically as loans or bonds.