In the Short Run, If the Price Is Above Average

question 10

Multiple Choice

In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes

• A) losses, and firms exit the market.
• B) profits, and firms exit the market.
• C) losses, and firms enter the market.
• D) profits, and firms enter the market.

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Definitions:

Marginal Utility

The boost in satisfaction or usefulness one gets from consuming an extra unit of any good or service.

Total Utility

The total satisfaction or benefit that a consumer derives from consuming a certain quantity of goods or services.

Marginal Utility

The increase in satisfaction or value derived from the consumption of one more unit of a good or service.

Utility Schedule

A table showing the relationship between quantities of goods consumed and the utility or satisfaction derived from those quantities.