If firms in a monopolistically competitive market are earning negative economic profits, it is likely that:
A. firms will enter the market.
B. the firms in the market will expand to try to capture lower costs per unit.
C. firms will exit the market.
D. the firms in the market will shut down immediately.
Answer: C
You might also like to view...
The CPI for 2012 was 121, and for 2013 it was 132. What was the inflation rate between 2012 and 2013?
A) 9.09 percent B) 11 percent C) 10 percent D) 8.3 percent E) 121.0 percent
Refer to Scenario 25-1. M1 in this simple economy equals
A) $1,000. B) $2,000. C) $3,000. D) $8,000.
The demand curve for a perfectly competitive firm is
A. elastic at relatively high prices and inelastic at relatively low prices. B. perfectly inelastic. C. unitary elastic. D. perfectly elastic.
When monopolistically competitive firms earn ________ economic profits, other firms ________ an industry in the long run.
A. positive; enter B. zero; exit C. negative; enter D. zero; enter