Which of the Following Is True About Long-Run Equilibrium in a Monopolistically

question 4

Multiple Choice

Which of the following is true about long-run equilibrium in a monopolistically competitive market?

• A) Firms earn zero economic profit because price equals long-run average cost, but the equilibrium is not allocatively efficient because price exceeds the marginal cost of the last unit produced.
• B) They may earn negative, zero, or positive economic profit because monopolistically competitive firms are price takers.
• C) Each firm faces a perfectly elastic demand curve and earns zero economic profit because price equals long-run average cost, and are allocatively efficient because price equals marginal cost for the last unit sold.
• D) None of the above are correct.

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