A FIRM Faces an Almost Perfectly Flat or Horizontal Demand

question 61

Multiple Choice

A FIRM faces an almost perfectly flat or horizontal demand curve in a(an) ______________ market situation.

• A) monopolistic competition
• B) monopoly
• C) pure competition
• D) oligopoly
• E) None of these--demand curves are always down-sloping.

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Definitions:

Fixed Costs

Costs that do not vary with the volume of production or sales, such as rent, salaries, and insurance premiums.

Variable Costs

Expenses that change in proportion to the amount of goods produced or the volume of sales, including labor and materials.

Operating Leverage

Operating leverage is a measure of how revenue growth translates into growth in operating income, highlighting the scalability of a company’s business model.

Variable Costs

Expenses that vary in relation to the amount of output or business operations.