Which of the Following Describes the Relative Positions of the Demand

question 156

Multiple Choice

Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?

• A)In the short run, the firm's demand curve will lie above its ATC curve.The demand curve will be tangent to the ATC curve in the long run.
• B)In the short run, the firm's demand curve will lie below its ATC curve.The demand curve will be tangent to the ATC curve in the long run.
• C)In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point.The demand curve will be above the ATC curve in the long run.
• D)In the short run, the firm's ATC curve will cross the demand curve at the profit maximising level of output.The demand curve will be tangent to the ATC curve in the long run.

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Definitions:

Carrying Amount

The recorded cost of an asset in a company's financial statements, less any accumulated depreciation or amortization.

Allowance for Doubtful Accounts

A contra-asset account used to reduce accounts receivable to its net realizable value by estimating uncollectible debts.

Bad Debts Expense

An expense recognized when it is probable that receivables will not be collected and is considered a cost of doing business on credit.

Allowance for Doubtful Accounts

A contra asset account that represents estimated uncollectible amounts from customers, reducing the gross receivables to their net realizable value.