In the Short Run,a Monopolistically Competitive Firm

question 83

Multiple Choice

In the short run,a monopolistically competitive firm:

• A)can earn only a normal profit.
• B)will produce at the point where marginal revenue is greater than marginal cost,in order to maximize profits.
• C)will produce at the point at which price equals minimum ATC to maximize profits.
• D)will be able to enter another monopolistically competitive industry.
• E)will shut down temporarily if price is less than AVC.

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Definitions:

Capital Gains

The profit earned from the sale of an asset, such as stocks or real estate, which has increased in value over the holding period.

Tax Rates

The percentage at which an individual or corporation is taxed, which can vary based on income levels, jurisdictions, and the type of taxes being calculated.

Dividend Irrelevance

Dividend irrelevance theory suggests that the dividend policy a company follows has no effect on the company’s stock price or its cost of capital.

Transaction Costs

Expenses incurred when buying or selling goods and services, which can include commissions, fees, the spread between buy/sell prices, and other related costs.