Which of the Following Is Most Characteristic of a Monopolistically

question 38

Multiple Choice

Which of the following is most characteristic of a monopolistically competitive market?

• A)Firms engage in strategic behaviour.
• B)There are many small firms in the industry.
• C)Economic profits are often positive in the long run.
• D)Each firm faces a horizontal demand curve.
• E)All firms are price takers.

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Definitions:

Producer Surplus

The divergence between the price at which sellers are ready to offer a good or service and the price they actually obtain.

Economic Efficiency

A state in which resources are allocated in a way that maximizes the total benefit received by society from those resources.

Consumer Surplus

The divergence between the price consumers are willing to pay and what they really spend on a good or service.

Floor Price

The minimum price set by regulation, often by the government, below which a commodity cannot legally be sold in the market.