Although Firms Earn Zero Profits in the Long Run, Why

question 37

Multiple Choice

Although firms earn zero profits in the long run, why is the outcome from monopolistic competition considered to be inefficient?

• A) Price exceeds marginal cost.
• B) Quantity is lower than the perfectly competitive outcome.
• C) Goods are not identical.
• D) A and B are correct.
• E) B and C are correct.

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Definitions:

Milgram Experiment

A psychological experiment conducted by Stanley Milgram in the 1960s to study obedience to authority, where participants were instructed to administer electric shocks to another person.

Stanford University Prison Experiment

A psychological study conducted by Philip Zimbardo in 1971 at Stanford University, where students were assigned roles of prisoners and guards to explore the effects of perceived power.

Generalization

Drawing a conclusion about a certain characteristic of a population based on a sample from it.

Logical Support

The provision of reasons or evidence to justify a claim or argument.