If Firms in a Monopolistically Competitive Industry Are Incurring Losses

question 227

Multiple Choice

If firms in a monopolistically competitive industry are incurring losses, in the long run

• A) investment in this industry will increase to reduce production costs.
• B) firms will leave this industry until the remaining firms are earning a normal profit.
• C) firms will leave this industry until the firms that remain are earning a positive economic profit.
• D) the government will subsidize the losses incurred by these firms so as to maintain competition in the industry.

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Definitions:

Tenuous

Describes something that is very weak, slight, or uncertain; having little substance or significance.

Threatened

Feeling endangered or at risk, either physically, emotionally, or psychologically, often leading to defensive or protective actions.

Actual Noise

This refers to real, tangible disturbances in the environment that can interfere with the transmission and reception of a message.

Social Noise

Distractions or miscommunications in social environments that hinder the clarity of the intended message.