Figure 11-7 Figure 11-7 Shows Short-Run Cost and Demand

question 87

Multiple Choice

Figure 11-7 Figure 11-7 shows short-run cost and demand curves for a monopolistically competitive firm in the market for designer watches.
-Refer to Figure 11-7.If the diagram represents a typical firm in the designer watch market,what is likely to happen in the long run?

• A)Some firms will exit the market causing the demand to increase for firms remaining in the market.
• B)The firms that are making losses will be purchased by their more successful rivals.
• C)Inefficient firms will exit the market and new cost efficient firms will enter the market.
• D)Firms will have to raise their prices to cover costs of production.

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Definitions:

Tax Liability

The total amount of tax owed to the government by an individual, corporation, or other entity within a given tax period.

Corporation

A legal entity that is separate and distinct from its owners, who are shareholders; it has rights, privileges, and liabilities independent of them.

FMV

Fair Market Value, the price that property would sell for on the open market.

Basis

The amount of investment in property for tax purposes; used to determine the gain or loss on the sale, exchange, or disposal of the property.