If a Monopolistically Competitive Firm's Demand Curve Is Shifting to the Left

question 16

Multiple Choice

If a monopolistically competitive firm's demand curve is shifting to the left, it will stop shifting when:

• A)price is equal to the firm's marginal cost.
• B)price is equal to the firm's average total cost.
• C)price is equal to that of a perfectly competitive firm.
• D)there is no deadweight loss in the market.

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Definitions:

Lemon Laws

Statutes designed to protect consumers from purchasing defective vehicles that fail to meet quality and performance standards.

Negative Externalities

Unintended and adverse side effects suffered by third parties or the environment as a result of economic activities.

Direct Controls

Government policies that directly constrain activities that generate negative externalities. Examples include maximum emissions limits for factory smokestacks and laws mandating the proper disposal of toxic wastes.

Economic Efficiency

A situation where resources are allocated in a way that maximizes the net benefit to society or achieves the desired output with the least waste.