In the Long Run, a Representative Firm in a Monopolistically

question 146

Multiple Choice

In the long run, a representative firm in a monopolistically competitive industry will end up

• A) having an elasticity of demand that will be less than it was in the short run.
• B) having a larger number of competitors than it will in the short run.
• C) producing a level of output at which marginal cost and price are equal.
• D) earning a normal profit, but not an economic profit.

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Definitions:

Elastic Demand

A situation where the quantity demanded of a good or service significantly changes in response to a change in its price.

Lerner Index

An economic measure of a firm's market power, calculated as the difference between price and marginal cost relative to price, indicating the degree of monopoly power.

Monopoly Power

The degree of power held by a monopoly, characterized by the ability to control market prices and exclude competitors within a particular market or industry.

Price Markup

The practice of setting the selling price of a product higher than its initial cost to achieve a profit margin.