The Monopolistic Competitive Firm in Short-Run Equilibrium May Experience Economic

question 183

Multiple Choice

The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

• A) always zero.
• B) greater than, equal to, or less than zero.
• C) always positive.
• D) always negative.

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Definitions:

Step-Down Method

A method of allocating costs whereby one service department’s cost is allocated to all remaining service departments and operating departments, and so on, until all service department costs are allocated to final products.

Death Spiral

A situation occurring when transfer prices include fixed costs and users reduce their use of the internal product or service. This further increases the transfer price (based on average cost) and more users reduce their demand.

Internal Pricing System

A method used by companies to assign a price to goods or services exchanged between the different divisions of the same company.

Legal Department

A specialized division within a corporation or organization tasked with handling legal matters and ensuring compliance with laws and regulations.