A Characteristic of Monopolistically Competitive Industries Is That

question 138

Multiple Choice

A characteristic of monopolistically competitive industries is that:

• A) there is product differentiation but only limited advertising of products by the representative firm.
• B) the entry and exit of firms causes the representative firm to break even in the long run.
• C) the representative firm is not very responsive to changes in consumer demand.
• D) the representative firm produces at that level of output where marginal cost equals minimum average total cost.

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Definitions:

Bankruptcy Risk

The risk that a company will be unable to meet its financial obligations and thus may have to declare bankruptcy.

Operating Leverage

A measure of how sensitive a company's operating income is to a change in revenue, indicating the level of fixed versus variable costs.

Financial Leverage

The use of borrowed money to increase the potential return of an investment, which also increases the risk of loss.

EPS

Earnings Per Share, a measure of a company's profitability calculated by dividing its net earnings by the number of outstanding shares.