If a Typical Monopolistically Competitive Firm Is Making Short-Run Losses

question 177

Multiple Choice

If a typical monopolistically competitive firm is making short-run losses, then

• A)other more competitive firms will enter the market.
• B)as some firms leave, the remaining firms will experience an increase in the demand for their products.
• C)as some firms leave, the demand for the products of the remaining firms will become more elastic.
• D)the industry will eventually cease to exist.

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Definitions:

Predetermined Overhead Rate

An estimated rate used to allocate manufacturing overhead costs to individual units of production based on a certain activity base.

Variable Component

The part of a cost or expense that varies directly with the level of activity or production volume, in contrast to fixed costs.

Electrical Motor

An electromechanical device that converts electrical energy into mechanical energy, commonly used in various appliances, machinery, and vehicles.

Labor-Hour

A unit of measure representing an hour of work performed by an employee.