If the Firm in the Graph Below Represents the Typical

question 40

Multiple Choice

If the firm in the graph below represents the typical firm in a monopolistically competitive industry, what would be most likely to occur?

• A)New firms would be likely to enter this industry.
• B)Existing firms would be likely to exit this industry.
• C)Firms would neither enter nor exit this industry.
• D)New firms would like to enter but since there are substantial barriers to entry they cannot do so.
• E)There is not sufficient information in this graph to draw a conclusion on entry or exit of firms.

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Definitions:

Business

An organization or enterprise engaged in commercial, industrial, or professional activities with the goal of generating profits.

Angel

An affluent individual who provides capital for a business start-up, usually in exchange for convertible debt or ownership equity.

Intervene

To come between disputing parties, events, or processes to alter a result or prevent certain actions.

Angel Investor

A wealthy individual who provides financial backing for small startups or entrepreneurs, often in exchange for ownership equity in the company.