A Monopolistically Competitive Firm ________ Have Excess Capacity Because Its

question 156

Multiple Choice

A monopolistically competitive firm ________ have excess capacity because its ________.

• A) does; demand curve is downward sloping
• B) does not; demand curve is downward sloping
• C) does; average total cost curve is U-shaped
• D) does not; average total cost curve is U-shaped
• E) does; marginal revenue curve lies below its demand curve

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Definitions:

Sinking Fund

A savings fund into which an organization sets aside money over time, intended to pay off a debt or bond at its maturity or to meet a future capital expense.

Subordinated

A ranking of debt that places this type of debt lower than other debts in terms of claims on assets or earnings, typically in the context of bankruptcy or liquidation.

Debt

An amount of money borrowed by one party from another, under the condition that it is to be paid back later, often with interest.

Equity

The value of an asset after deducting the total liabilities, or the ownership interest in a company divided among shareholders.