If firms in monopolistic competition are earning economic profits, eventually
A) they shut down.
B) they exit the industry.
C) the market turns into a monopoly.
D) new firms enter the industry.
E) the firms in the market increase their production so that their economic profit disappears.
D
You might also like to view...
Fiscal policy is most effective when exchange rates are fixed
Indicate whether the statement is true or false
A perfectly elastic demand is one in which the:
A. demand curve is perfectly vertical. B. demand curve is perfectly horizontal. C. price elasticity is exactly 1. D. response to a change in price is immediate.
If the two music stores are faced with the game in the figure, we can see that:
This figure displays the choices and payoffs (company profits) of two music shops-MiiTunes and The Rock Shop. MiiTunes is an established business in the area deciding whether to charge its usual high prices or to charge very low prices, in the hopes that a new business will not be able to make a profit at such low prices. The Rock Shop is trying to decide whether or not it should enter the market and compete with MiiTunes.
A. The Rock Shop has a dominant strategy, but MiiTunes does not.
B. MiiTunes has a dominant strategy, but The Rock Shop does not.
C. neither store has a dominant strategy.
D. both stores have a dominant strategy.
In a market where firms are able to reduce their private costs by shifting costs onto others, which of the following will not happen? a. Inefficiencies will occur
b. Negative externalities will be observed. c. The market prices of products produced by firms will be too low relative to the social optimum. d. Output of the good being produced will be too low.