The Following Graph Shows a Firm Producing Jeans in a Monopolistically

question 85

Multiple Choice

The following graph shows a firm producing jeans in a monopolistically competitive market. The firm faces a downward-sloping, linear demand curve, D. The marginal revenue curve of the firm is shown by MR. AC and MC are the average total cost and marginal cost curves of the firm. Which of the following is likely to be true about the apparel industry?Figure 9.3:

• A)New firms will enter the jeans industry.
• B)Existing firms will exit the jeans industry.
• C)The industry is at long-run equilibrium.
• D)At the profit-maximizing level, output is produced at the minimum average total cost.
• E)At the profit-maximizing level, price equals marginal revenue.

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Definitions:

Point Estimate

A single value given as an estimate of a parameter of a population.

Dependent Variable

A variable in statistical modeling and experiments whose value is dependent on that of one or more other variables.

Least Squares Estimate

A method of estimating the coefficients in a linear regression model by minimizing the sum of the squares of the differences between observed and predicted values.

Slope

A measure of the steepness or incline of a line, often calculated as the ratio of the vertical change to the horizontal change between two points on the line.