Which of the Following Statements Is Not True for a Monopolistically

question 170

Multiple Choice

Which of the following statements is not true for a monopolistically competitive industry?

• A) Firms tend to operate with excess capacity.
• B) Each firm faces a downward-sloping demand curve.
• C) These firms earn zero economic profits in the long run.
• D) Firms operate at the lowest point of their ATC curves in the long run.

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Definitions:

Overt Collusion

An explicit agreement among competitors to fix prices, allocate markets, or limit production, which is illegal in many jurisdictions.

Tacit Collusion

A form of collusion in which firms in a market coordinate their pricing or output strategies without explicit communication or agreement.

Competition

The rivalry among sellers trying to achieve such goals as increasing profits, market share, and sales volume by varying the elements of the marketing mix.

Illegal

Activities or actions that are prohibited by law and subject to legal penalties, including fines and imprisonment.