If a typical monopolistically competitive firm is incurring 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.
Answer: B
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The amount of time that it takes to identify a national economic problem is
A) the effect time lag. B) the action time lag. C) the recognition time lag. D) fiscal policy.
Refer to Figure 15-5. If the monopolist charges price P* for output Q*, in order to maximize profit or minimize loss in the short run, it should
A) continue to produce because price is greater than average variable cost. B) shut down because price is greater than marginal cost. C) continue to produce because a monopolist always earns a profit. D) shut down because price is less than average total cost.