If a Monopolistically Competitive Firm Is Making Positive Economic Profits

question 2

Multiple Choice

If a monopolistically competitive firm is making positive economic profits we would expect

• A)Entry of other firms
• B)The firm to continue making the positive economic profits
• C)The firm to expand market share and the industry to move toward an oligopoly structure
• D)The firm to hire more labor

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Definitions:

Price Level

The price level represents the average of the current prices of goods and services in an economy, often measured by a price index.

Domestic Prices

The cost of goods and services within a country's borders, influenced by local demand, supply, taxes, and subsidies.

Real Exchange Rate

The ratio at which a country's currency can be traded for another country's currency, adjusted for inflation differences between the two countries.

Appreciated

An increase in the value of an asset or currency over time, typically due to market dynamics such as demand and supply.