The Behavior of the Monopolistic Firm

question 107

Multiple Choice

The behavior of the monopolistic firm

• A)maximizes the benefits to consumers, given the resources available to the economy.
• B)increases output in order to raise prices in the short term.
• C)results in excess capacity and inefficiency.
• D)results in entry into the market by other firms.

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Definitions:

Long-Run Equilibrium

A state in which a market or economy has adjusted to all internal and external changes and forces, resulting in no incentive for allocation or production adjustments.

Rational Criterion

A standard or principle for making decisions based on logical and coherent reasoning, aimed at achieving the best possible outcome.

Process of Entry

refers to the steps or actions that need to be taken for a new competitor to enter into an existing market.

Price

The financial expectation, obligation, or contribution made as payment for something.