When a Profit-Maximizing Firm in a Monopolistically Competitive Market Charges

question 212

Multiple Choice

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

• A)the firm must be earning a positive economic profit.
• B)the firm may be incurring economic losses
• C)there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity.
• D)new firms will enter the market in the long run.

---

Definitions:

Racemizes

Refers to the process of converting an optically active compound into a racemic mixture, meaning a blend of equal amounts of enantiomers.

Esterifies

The process by which an ester is formed, usually from the reaction between an acid and an alcohol with the elimination of water.

Hydrolyzes

Refers to the chemical process where water is used to break down a compound, often a polymer, into smaller units.

Organic Product

A compound produced through an organic reaction, typically consisting of carbon atoms in combination with hydrogen, oxygen, nitrogen, or other elements.