When Firms Exit a Monopolistically Competitive Industry

question 127

Multiple Choice

When firms exit a monopolistically competitive industry:

• A) the average total cost curves of remaining firms will shift upward.
• B) the demand curves of remaining firms are increased at each level of output.
• C) the remaining firms will decrease production.
• D) the average revenue received by remaining firms will decrease at each level of output.

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Definitions:

Net Operating Income

The income generated from normal business operations, calculated by deducting operating expenses from gross income.

Absorption Costing

An accounting method that includes all manufacturing costs (direct materials, direct labor, and both variable and fixed overhead) in the cost of a product.

Fixed Costs

Costs that remain constant in total regardless of changes in the level of the business activity or production volume.

Product Costs

Costs that are directly associated with the production of goods or services, including direct materials, direct labor, and manufacturing overhead.