In the Short Run in a Monopolistically Competitive Industry

question 1

Multiple Choice

In the short run in a monopolistically competitive industry:

• A)MR = MC; if a firm is making zero economic profits, it will immediately leave the industry.
• B)MR = MC; if a firm is making negative economic profits it will immediately leave the industry.
• C)MR = MC < P; a firm can make positive, negative or zero economic profits.
• D)MR = ATC < P; a firm makes positive economic profits.
• E)None of the above.

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Definitions:

Incremental Cash Flows

The additional operating cash flow that an organization receives from taking on a new project, distinct from the organization's existing cash flow.

Future Net Income

An estimation of a company's future earnings after all expenses and taxes have been subtracted from revenue.

Project

A project is a temporary endeavor designed to produce a unique product, service, or result with a defined beginning and end, often constrained by funding or deliverables.

Erosion Costs

Costs that occur when a new project leads to a decline in revenues or increase in expenses of existing products or services.