One Source of Inefficiency in Monopolistic Competition Is That

question 22

Multiple Choice

One source of inefficiency in monopolistic competition is that

• A) since price is above marginal cost, surplus is redistributed from buyers to sellers.
• B) monopolistically competitive firms earn economic profits in the long run.
• C) monopolistically competitive firms produce beyond their efficient scale.
• D) since price is above marginal cost, some units are not produced that buyer's value in excess of the cost of production and this causes a deadweight loss.

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Definitions:

Interest Rates

The percentage of a sum of money charged for its use, determined by the lender and agreed upon by the borrower.

Earnings Per Share

A company's net profit divided by the number of its outstanding shares, indicating how much money each share makes.

Periodic Basis

An accounting method where transactions are recorded and financial statements are prepared at regular, specific intervals, such as monthly, quarterly, or annually.

Bondholders

Individuals or institutions that hold the debt securities issued by corporations or governments, entitled to receive interest payments and the principal repayment.