In Principle, a Comparison of the Long- Run Equilibrium of Competitive

question 85

Multiple Choice

In principle, a comparison of the long- run equilibrium of competitive and (single- price) monopoly industries leads to the following conclusion:

• A) the competitive industry is consistent with allocative efficiency whereas the monopoly is not.
• B) neither industry is capable of allocative efficiency.
• C) the competitive industry will achieve productive efficiency but the monopoly will not.
• D) both the competitive industry and the monopoly will allocate resources inefficiently.
• E) both the competitive industry and the monopoly will allocate resources efficiently.

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Definitions:

Holding-Period Return

Is the total return received from holding an asset or portfolio of assets over a period of time, typically expressed as a percentage.

Dividend

A portion of a company's earnings distributed to shareholders, typically in cash or additional stock.

Real Interest Rates

The interest rate adjusted for inflation, representing the true cost of borrowing and the real yield to investors.

Supply of Savings

The total amount of savings that households are willing to provide at various interest rates, often influencing investment and economic activity.