Refer to the Diagram for a Monopolistically Competitive Firm

question 266

Multiple Choice

Refer to the diagram for a monopolistically competitive firm. If more firms were to enter the industry and product differentiation were to weaken, then

• A)resource misallocation would become more severe.
• B)the demand curve would become more elastic.
• C)firms would begin earning economic profits.
• D)the firm would achieve allocative efficiency.

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Definitions:

Put Option

A financial contract giving the buyer the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Striking Price

The predetermined price at which the holder of an option can buy or sell the underlying security.

Cumulative Feature

A characteristic of certain preferred stocks or securities where unpaid dividends accumulate and must be paid before dividends to common stockholders.

Common Dividends

Distributions of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders known as common shareholders.