The Figure Given Below Shows the Revenue and Cost Curves

question 97

Multiple Choice

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Which of the following is true of the model of monopolistic competition?

• A)Barriers to entry enable firms to enjoy positive profits in the long run.
• B)The number of firms declines over time as a result of economies of scale.
• C)The monopolistically competitive firms enjoy a greater market power than a monopolist.
• D)Firms tend to locate near each other in order to minimize total travel costs for consumers.
• E)The firms end up charging same prices for their individual products.

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Definitions:

Rate of Return

A measure of the profitability and efficiency of an investment, expressed as a percentage of the original investment.

Initial Investment

The funds allocated to start a business or a project, representing the beginning financial input.

Net Present Value

The calculation of the present value of the sum of the present values of all cash inflows and outflows expected from an investment, using a specific discount rate to value future cash flows.

Cost Savings

Reductions in expenses that contribute to increased profit margins.