In Theory, in the Long Run, Monopolistically Competitive Firms Earns

question 20

Multiple Choice

In theory, in the long run, monopolistically competitive firms earns zero profits. However, in reality there are some ways by which a firm can avoid losing profits. Which of the following is one such way?

• A) gradually increase the mark-up on the goods produced
• B) lower the price of its products to expand its market share
• C) identify new markets and develop products precisely for those markets
• D) find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

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Definitions:

Fair Value

The amount one would expect to receive from selling an asset or the cost to transfer a liability in a smooth transaction among market players on the date of valuation.

Non-Controlling Interest (NCI)

The portion of equity ownership in a subsidiary not attributable to the parent company, reflecting the minority shareholders' share of the subsidiary's net assets and profits.

Statement Of Financial Position

A financial statement that provides a snapshot of a company's assets, liabilities, and shareholders' equity at a specific point in time, also known as a balance sheet.

IFRS 3

An International Financial Reporting Standard that deals with the accounting treatment for all business combinations.