Suppose a Monopolistically Competitive Industry Evolved into a Perfectly Competitive

question 124

Multiple Choice

Suppose a monopolistically competitive industry evolved into a perfectly competitive industry.Which of the following statements is correct?

• A) The industry would produce more output and charge a lower price after the change.
• B) The industry would produce at decreasing returns to scale.
• C) Elasticity of demand for the firm's product would remain the same after this change occurred.
• D) This industry would produce the same level of output at lower prices in the long run than before the change.

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Definitions:

Prices

The amount of money required to purchase a good, service, or asset, often determined by supply and demand dynamics in the market.

Hedge

Investment protection method utilized to reduce the potential for financial loss by offsetting price movements in a related asset.

Futures Contracts

Futures Contracts are legal agreements to buy or sell a particular commodity or financial instrument at a predetermined price at a specified time in the future, widely used for hedging and speculative purposes.

Bushels

A unit of volume that is commonly used in agriculture, especially for measuring grains.