To Maximize Their Profits and Defend Those Profits from Competitors

question 122

Multiple Choice

To maximize their profits and defend those profits from competitors, monopolistically competitive firms must

• A)lobby government to erect barriers to entry in their industries.
• B)limit foreign competition in their markets by encouraging the government to impose tariffs and other trade restrictions.
• C)differentiate their products.
• D)achieve economies of scale.

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Definitions:

Average Cost

The total cost divided by the quantity produced, reflecting the per-unit cost of production.

Competitive Firm

A company that operates in a market where it has to price its goods or services according to market conditions due to the presence of many competitors.

Negative Economic Profit

A situation where a firm's total revenues are less than the sum of its explicit and implicit costs, indicating a loss in economic terms.

Perfectly Competitive

A market structure where many firms offer products that are similar and entry and exit from the market are easy, leading to price being determined by supply and demand.