Consider the Following Statement: "A Monopolistically Competitive Market in Which

question 91

Multiple Choice

Consider the following statement: "A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive." Is this statement correct?

• A)No,because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
• B)No,because firms in the monopolistically competitive market do not produce at an output level where MC = MR,as in perfect competition,which leads to a different price and output in long-run equilibrium.
• C)No,firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve,whereas in perfect competition they earn zero profits.
• D)Yes,in the absence of entry barriers,new firms enter the industry until industry price and output are identical to perfect competition.
• E)Yes,in the absence of entry barriers,firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves,just as in perfect competition.

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Definitions:

British Empiricists

Philosophers from Britain who emphasized the importance of sensory experience as the foundation of knowledge.

Transduction

The process of converting one form of energy into another, as in sensory organs transforming physical stimuli into nerve signals.

Sensitization

The process of becoming more receptive or sensitive to a stimulus after repeated exposure to it.

Distal Stimuli

Objects and events in the external world that provide sensory input, as opposed to the sensory signals (proximal stimuli) actually perceived by the senses.