One Thing That Makes Monopolistic Competition Similar to Perfect Competition

question 100

Multiple Choice

One thing that makes monopolistic competition similar to perfect competition is that, in the:

• A) long run, both are guaranteed positive economic profit.
• B) short run, both are guaranteed positive economic profit.
• C) short run, neither can earn positive economic profit.
• D) long run, both will earn zero economic profit.
• E) long run, both could earn positive economic profit, but monopolistic competitors will earn more than perfect competitors will.

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Definitions:

Profit

The financial gain made in a transaction or operation, calculated as the difference between revenue and expenses.

Contribution Rate

The percentage of income that is saved or invested, often in the context of pension plans or retirement savings.

Fixed Costs

Stable costs encompassing rent, salaries, and insurance, unaffected by variations in production or sales levels.

Break-Even

The point where overall expenses match overall income, leading to neither a profit nor a loss.