Figure 13-18 -Refer to Figure 13-18.The Diagram Demonstrates That

question 178

Multiple Choice

Figure 13-18

-Refer to Figure 13-18.The diagram demonstrates that

• A)in the short run, the monopolistic competitor produces an output Qb but in the long run after it adjusts its capacity, it will produce the allocatively efficient output, Qₐ.
• B)it is not possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, because of product differentiation.
• C)it is possible for a monopolistic competitor to produce the productively efficient output level, Qₐ, if it is willing to lower its price from Pb to Pₐ.
• D)in the long run, the monopolistic competitor produces the minimum-cost output level, Qₐ, but in the short run its output of Qb is not cost minimizing.

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Definitions:

Average Accounting Return (AAR)

This is a financial metric used to assess the profitability of an investment, calculated by dividing the average net income by the average investment.

Profit Margin

A financial metric expressed as a percentage, indicating the ratio of a company's profits to its total revenues.

Depreciated Straight-Line

A method of depreciation where an asset's cost is reduced equally over its useful life.

Accounting Rate of Return

A financial ratio that measures the expected profitability of an investment, calculated as the average annual profit divided by the initial investment cost.