If in a Given Market of More Than One Producer

question 68

Multiple Choice

If in a given market of more than one producer, there were to exist for a long interval of time a positive gap between price and average cost (P > AC) , this would suggest that

• A)there are many sellers in the industry.
• B)there exists an oligopoly or cartel in the industry.
• C)this is a contestable market.
• D)the firm cannot be a monopolistic competitor.

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Definitions:

Utility Function

A mathematical representation of how individual preferences are aggregated to represent satisfaction or utility from consuming goods and services.

Marginal Utility

The additional satisfaction or benefit received by consuming one more unit of a good or service.

Budget Line

A representation of all possible combinations of two goods that an individual can afford given their income and the prices of the goods.

Income-Consumption Curve

A graphical representation showing how a consumer's optimal bundle of goods varies with changes in income.