In the Long Run, a Monopolistically Competitive Firm Will Set

question 28

Multiple Choice

In the long run, a monopolistically competitive firm will set price:

• A) at the intersection of the marginal cost and demand curves.
• B) at the intersection of the average total cost and demand curves.
• C) higher than the competitive level, but lower than the monopoly price.
• D) higher than the marginal cost, but lower than average total cost.

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Definitions:

Production Possibilities Curve

A graphical representation that shows the various combinations of two products that an economy can produce using all its resources efficiently.

Economies of Scale

Cost advantages reaped by companies when production becomes efficient, due to the scale of operation increasing.

Opportunity Cost

The abandonment of potential improvements from other possibilities once one choice is made.

Absolute Advantage

A country's ability to produce a good more efficiently than other countries, requiring fewer resources for the same output.