Graph 17-3 Lines in These Figures Reflect the Potential

question 22

Multiple Choice

Graph 17-3 Lines in these figures reflect the potential effect of entry and exit in a monopolistically competitive market on the demand and/or marginal cost curves of incumbent firms.
-Refer to Graph 17-3.Panel c in the set of graphs shown depicts the effect on incumbent firms of:

• A)a few existing firms exiting the market
• B)new entrants in the market
• C)long-run economic losses
• D)an increase in the diversity of products offered in the market

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Definitions:

Output

The total amount of goods or services produced by a business, industry, or economy.

Marginal Revenue

Additional earnings received from the sale of one more unit of a product or service.

Marginal Cost

The financial commitment for manufacturing an additional unit of a product or service.

Profits

The financial gain obtained when the revenues earned from business activities exceed the expenses, costs, and taxes needed to sustain those activities.