Will a monopolistically competitive firm continue to operate in the short run despite earning negative economic profit? Explain your answer
What will be an ideal response?
The decision rule for a monopolistic competitor operating in the short run is exactly the same as for a monopoly and a competitive firm. The firm should continue to operate if total revenue covers all of the firm's variable costs. However, if total revenues do not cover variable costs, shutting down is optimal.
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What is the source of comparative advantage in the Heckscher-Ohlin model?
What will be an ideal response?
Which of the following is NOT a reason given by economists for the failure of Okun's law to account for the rise in unemployment during the recession of 2007-2009?
A) increased willingness among firms to lay off workers during recessions B) a surge in productivity during the recession C) the unusual severity of the recession D) it does not take into account the effect of the stimulus
Which of the following is not a benefit to lenders/investors of financial intermediation?
a. More diversification than the direct market. b. More convenient than the direct market. c. Higher yield than the direct market. d. All the above are benefits to lenders. e. Lower risks than the direct market.
Which of the following describes the benefits of specialization in a free market?