If Firms in a Monopolistically Competitive Industry Are Making Profits
If firms in a monopolistically competitive industry are making profits in the short run,________.
A) barriers to entry will be erected to keep out rivals
B) some firms will ultimately exit the industry
C) they will resort to advertising wars to help sustain these profits
D) new firms will enter the market
A monopolistically competitive firm that earns an accounting profit in the short run _______.
A) must also earn an economic profit in the short run
B) does not earn enough to earn an economic profit in the short run
C) could earn an economic profit, break even or suffer an economic loss in the short run
D) could earn an economic profit or break even, but could not suffer an economic loss in the short run
In the long run,if the demand curve of a monopolistically competitive firm is tangent to its average total cost curve,then _______.
A) the firm would break even
B) the firm would shut down temporarily
C) the firm would earn enough revenue to cover its variable costs, but not its fixed costs
D) the firm would earn an economic profit
Which of the following would not occur as a result of a monopolistically competitive firm suffering a short-run economic loss?
A) The firm could exit the industry in the long run.
B) If the firm does not exit the industry in the long run, its demand curve will shift to the left.
C) If the firm does not exit the industry in the long run, its demand curve will shift to the right.
D) If the firm remains in the industry in the long run, it will break even.