The Process of Entry and Exit into a Monopolistically Competitive

question 1

Multiple Choice

The process of entry and exit into a monopolistically competitive market continues until:

• A) profits are zero.
• B) long-run equilibrium is reached.
• C) price is equal to average total cost.
• D) All of these statements are true.

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Definitions:

ATC Curve

Average Total Cost Curve, a graph that shows the cost per unit of output produced, plotted against the quantity of output.

Economies Of Scale

Cost advantages reaped by companies when production becomes efficient, resulting in a decrease in the per-unit cost as the output increases.

AVC

Average Variable Cost, which is the cost a company incurs to produce one additional unit of a product, excluding fixed costs.

ATC

Average Total Cost, the total cost of production divided by the number of units produced, often used in economics to analyze production efficiency.