Which of the Following Describes the Relative Positions of the Demand

question 156

Multiple Choice

Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?

• A)In the short run, the firm's demand curve will lie above its ATC curve.The demand curve will be tangent to the ATC curve in the long run.
• B)In the short run, the firm's demand curve will lie below its ATC curve.The demand curve will be tangent to the ATC curve in the long run.
• C)In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point.The demand curve will be above the ATC curve in the long run.
• D)In the short run, the firm's ATC curve will cross the demand curve at the profit maximising level of output.The demand curve will be tangent to the ATC curve in the long run.

---

Definitions:

Marginal Social Benefit

The additional benefit received by society as a whole from the production or consumption of one more unit of a good.

Marginal Social Benefit

The additional gain to society as a whole from an additional unit of a good or service, considering both private benefits and externalities.

Marginal Benefit Curve

The Marginal Benefit Curve is a graphical representation showing how the benefit or utility from consuming each additional unit of a good decreases as more units are consumed.

Government Intervention

Regulatory actions taken by a government in order to affect or interfere with decisions made by individuals, groups, or organizations regarding economic and social matters.