A Product Is Turned into a Commodity When

question 143

Multiple Choice

A product is turned into a commodity when

• A) there is only one seller of a product
• B) there is no more incentive for new businesses to enter
• C) there is product differentiation
• D) economic profits can be earned
• E) consumers perceive the product to be differentiated

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Definitions:

Zero Profits

A situation where a firm's total revenues exactly equal its total costs, typically in the long run in perfectly competitive markets.

Monopolistic Competition

A market structure characterized by many firms selling products that are similar but not identical, with few barriers to entry.

Price Exceeds Marginal Cost

A situation where the price of a good is higher than the marginal cost of producing it, often indicating imperfect competition.

Excess Capacity

The situation where a firm is producing at a lower scale of output than it has been designed to handle, resulting in unused productive capacity.