The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Which of the following is true of the model of monopolistic competition?
A)Barriers to entry enable firms to enjoy positive profits in the long run.
B)The number of firms declines over time as a result of economies of scale.
C)The monopolistically competitive firms enjoy a greater market power than a monopolist.
D)Firms tend to locate near each other in order to minimize total travel costs for consumers.
E)The firms end up charging same prices for their individual products.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-Which of the following is true of the model of monopolistic competition?
A)Barriers to entry enable firms to enjoy positive profits in the long run. 
B)The number of firms declines over time as a result of economies of scale. 
C)The monopolistically competitive firms enjoy a greater market power than a monopolist. 
D)Firms tend to locate near each other in order to minimize total travel costs for consumers. 
E)The firms end up charging same prices for their individual products.

Quizplus · Accepted Answer

In a monopolistically competitive market, firms often locate near each other to minimize total travel costs for consumers, a phenomenon observed in retail sectors like restaurants or clothing stores. This clustering helps attract more customers to the area, benefiting all businesses involved.

The Figure Given Below Shows the Revenue and Cost Curves