The Ability to Set a Price Greater Than Marginal Cost

question 6

True/False

The ability to set a price greater than marginal cost guarantees an economic profit for the monopolistic competitor (assuming P > AC).

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Definitions:

Credit

An accounting entry that increases liabilities or equity or decreases an asset or expense.

Prepaid Insurance

An asset account that reflects payments made for insurance coverage periods extending into the future; it is expensed over time as the coverage period lapses.

Normal Balance

Refers to the debit or credit balance that is expected on a specific type of account based on its accounting rule.

Contra Asset

An asset account where the account balance is a negative amount that reduces the total value of assets on the balance sheet.