The Long-Run Outcome of the Monopolistically Competitive Firm

question 39

Multiple Choice

The long-run outcome of the monopolistically competitive firm:

• A)occurs where price equals marginal cost.
• B)maximizes total surplus.
• C)creates welfare loss.
• D)does not maximize profits.

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Definitions:

Recession

A phase of short-term economic downturn marked by decreased business and manufacturing operations, typically recognized by a decline in Gross Domestic Product for two consecutive quarters.

Efficiency-Wage Theory

The concept that employers may pay a higher wage than the market equilibrium to increase worker productivity, loyalty, and satisfaction, thereby reducing turnover and shirking.

Labor Unions

Organizations that represent workers in negotiations with employers over wages, working conditions, and benefits to protect their rights and interests.

Efficiency Wage

A theory stating employers pay a wage that is higher than the market equilibrium to increase worker productivity and efficiency.