When New Firms Are Encouraged to Enter a Monopolistically Competitive

question 35

Multiple Choice

When new firms are encouraged to enter a monopolistically competitive market,

• A)some existing firms must be earning economic profits.
• B)they do so because there is insufficient product differentiation.
• C)the demand curve facing an existing firm shifts to the right.
• D)the marginal cost curve facing an existing firm shifts downwards.

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Definitions:

Erie Canal

A historically significant man-made waterway in New York State, opened in 1825, which connected the Great Lakes with the Atlantic Ocean, facilitating trade and migration.

Steel Plow

An agricultural implement invented by John Deere, making it easier to till the tough prairie soil of the United States.

Factory System

A method of manufacturing using machinery and division of labor, characteristic of the Industrial Revolution, and significantly evolved from previous methods of manual and home-based production.

Power-Driven Machinery

Machines that operate using an external source of power, such as electricity, steam, or fuel, allowing for more efficient production processes in various industries.