When a Monopolistically Competitive Firm Is Making Zero Economic Profits,it

question 200

Multiple Choice

When a monopolistically competitive firm is making zero economic profits,it is producing so that the average total cost curve is tangent to the demand curve.At this output:

• A)the firm is maximizing profits,and marginal cost must equal marginal revenue.
• B)the firm is not maximizing profits,and a slight increase or decrease in output will lead to positive profits.
• C)since economic profits are zero,the condition that marginal revenue equals marginal cost is irrelevant.
• D)the condition that marginal revenue equals marginal cost continues to be relevant,but the marginal revenue and marginal cost curves need not intersect directly below the point of tangency between the average total cost curve and the demand curve.

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Definitions:

Conceptual Framework

An underlying structure in accounting that outlines the objectives and fundamentals leading to consistent standards and financial reporting.

Qualitative Characteristic

A fundamental attribute that makes the information provided in financial statements useful to users.

Going Concern

An accounting principle that assumes a company will continue in operational existence for the foreseeable future, without the intention or necessity of liquidation.