Which Statement Concerning Monopolistic Competition Is False

question 125

Multiple Choice

Which statement concerning monopolistic competition is false?

• A) Long-run equilibrium under monopolistic competition is achieved where economic profits are zero.
• B) Monopolistic competition is likely to result in a greater variety of product brands than pure competition.
• C) The monopolistically competitive demand curve is more elastic than the demand curve facing a monopolistic firm.
• D) Monopolistic competition does not lead to any economic inefficiency since firms in this industry cannot sustain economic profits.

Analyze how changes in prices and income affect the demand for goods, taking into account the roles of perfect substitutes and complements.

Identify and distinguish between the Slutsky and Hicks versions of income and substitution effects.

Understand utility functions and how consumers maximize utility subject to budget constraints.

Explain the effects of price and income elasticity of demand on consumer purchasing behavior.

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Definitions:

Average Total Cost

The per unit cost of production, calculated by dividing the total costs by the quantity of output produced.

Profit-maximizing

A strategy or point at which a business makes the greatest financial gain, where marginal revenue equals marginal cost.

Total Revenue

The overall income generated by a business from its sales or services before any costs or expenses are subtracted.

Total Cost

The sum of fixed and variable costs incurred by a firm in producing and selling a product.