A Monopolistically Competitive Firm and a Monopoly Are Similar Because

question 80

Multiple Choice

A monopolistically competitive firm and a monopoly are similar because

• A) both firms always operate at their point of minimum average total cost.
• B) both firms must behave strategically toward other firms in the industry.
• C) each firm can raise its price without losing all of its sales.
• D) each firm has a large number of small competitors.
• E) both firms will earn zero profits in the long run.

---

Definitions:

Monopoly Markets

Markets dominated by a single seller, where the monopolist has significant control over the price and supply of a product or service.

Deadweight Losses

Economic inefficiencies that arise when market equilibrium is not achieved, often resulting from monopolies, taxes, subsidies, or price controls, leading to lost welfare for consumers or producers.

X-inefficiency

The difference between efficient behavior of businesses under competitive environments versus the inefficiency that arises in the absence of competition.

Competitive Firms

Companies that operate in markets where no single firm has the power to influence the price of goods and services significantly.