Use the Following to Answer Questions

question 126

Multiple Choice

Use the following to answer questions :
Figure: Profit Maximization in Monopolistic Competition
-(Figure: Profit Maximization in Monopolistic Competition) Use Figure: Profit Maximization in Monopolistic Competition.In panel (b) of the figure,the profit-maximizing price is P₂ and the ATC curve is tangent to the new demand curve.The portion of the ATC that lies to the right of the tangency and continues down to the intersection of MC with ATC indicates:

• A) that the firm is incurring an economic loss.
• B) that the firm is earning an economic profit.
• C) overutilization.
• D) excess capacity.

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Definitions:

Stock Issuance Costs

Expenses associated with the issuance of new shares of stock, such as legal, accounting, and underwriting fees.

Consolidated Long-term Liabilities

The total amount of long-term debts that a company reports on its balance sheet, including all of its subsidiaries.

Voting Shares

Voting shares are shares of stock in a company that grant the shareholder the right to vote on corporate matters, typically in proportion to the number of shares held.