When a Profit-Maximizing Firm in a Monopolistically Competitive Market Charges

question 212

Multiple Choice

When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,

• A)the firm must be earning a positive economic profit.
• B)the firm may be incurring economic losses
• C)there is a deadweight loss to society, but it is exactly offset by the benefit of excess capacity.
• D)new firms will enter the market in the long run.

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Definitions:

Contracting Parties

The entities or individuals who enter into a contract or legal agreement with each other.

Fraudulent Conveyance

A transfer of property with the intent to defraud creditors.

Consideration

A legal concept in contract law referring to something of value exchanged between parties to a contract, a requirement for the contract to be binding.

Accounts Receivable

Represents money owed to a company by its customers for goods or services that have been delivered or used but not yet paid for.