Due to the Entry and Exit of Firms in a Monopolistically

question 118

Multiple Choice

Due to the entry and exit of firms in a monopolistically competitive market:

• A) economic profits and economic losses are dissipated in the long run.
• B) economic profits persist in the long run, but not economic losses.
• C) economic losses will exist in the long run, but not economic profits.
• D) both economic profits and economic losses exist in the long run.

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Definitions:

Consumer Surplus

The split between the sum consumers would ideally pay for a good or service and the sum they actually end up paying.

Producer Surplus

The discrepancy between the price at which sellers are prepared to offer a product and the actual selling price they obtain.

Market Failure

The failure of a market to be efficient; when the individual pursuit of self-interest leads to bad results for society as a whole.

Market Power

The ability of a producer to raise prices.