Suppose That a Monopolistically Competitive Market Is in Its Long-Run

question 314

Multiple Choice

Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the right due to changes in consumer preferences

• A) the number of firms in the market will increase in the short run.
• B) firms will earn positive economic profits in the short run.
• C) firms' average costs of production will increase as they increase output levels in the short run.
• D) none of the above.

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Definitions:

Workers

Individuals engaged in physical or mental effort aimed at producing goods or providing services in exchange for wages.

Perfect Competitor

A market structure where many firms offer products or services that are similar, allowing for free entry and exit, and no single firm can influence the market price.

Imperfect Competitor

An entity in a market that does not hold enough power to dictate the conditions of the market but can influence the price and output of its goods to some extent.

MRP

Marginal Revenue Product, the additional revenue generated from employing one more unit of a factor of production.