In Monopolistic Competition,a Firm's Demand Curve Is Tangent to the ATC

question 106

Multiple Choice

In monopolistic competition,a firm's demand curve is tangent to the ATC curve in the long run because

• A)Barriers to entry are high.
• B)Entry eliminates economic profit,and exit eliminates losses.
• C)Advertising is ineffective in differentiating the product.
• D)Producers are price takers.

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Definitions:

Common Stock

Equity ownership in a corporation, providing voting rights and a share in the company’s profits through dividends.

Held-to-Maturity Bonds

Bonds that an issuer has the intent and ability to hold until a defined maturity date.

Accrued Interest

Interest that has been earned but not yet received in cash or recorded by the payee.