If a Firm in a Monopolistically Competitive Market Has a Demand

question 19

Multiple Choice

If a firm in a monopolistically competitive market has a demand curve shifting to the right,it could be that:

• A) negative economic profits are being earned.
• B) firms are leaving the market.
• C) the selling price is less than the average total cost of the firm.
• D) All of these statements are true.

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Definitions:

Depreciation

The methodical allocation of the cost of a tangible asset over its useful life.

Differential Cost

Any cost that differs between alternatives in a decision-making situation. This term is synonymous with avoidable cost and relevant cost.

Decision-Making

The cognitive process of selecting a course of action from multiple alternatives.

Cost Alternatives

Different cost scenarios or options evaluated in decision-making processes.