When a Monopolistically Competitive Industry Is in Long- Run Equilibrium

question 69

Multiple Choice

When a monopolistically competitive industry is in long- run equilibrium, the excess capacity in an individual firm is indicated by the difference between

• A) price and average cost.
• B) zero and the output at which the demand curve is tangent to the ATC curve.
• C) the output at which ATC is at a minimum and the output at which price equals marginal cost.
• D) the output at which ATC is at a minimum and the output at which marginal revenue is equal to marginal cost.
• E) price and marginal cost.

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Definitions:

Critical Thinking

The process of purposeful, reflective judgment. Critical thinking manifests itself in giving reasoned and fair-minded consideration to evidence, conceptualizations, methods, contexts, and standards in order to decide what to believe or what to do.

Hypothesis

A proposed explanation made on the basis of limited evidence as a starting point for further investigation.

Evidence

Information or facts that are used to support the validity of a statement or argument.

Interpretation

An expression of the meaning or significance of a wide variety of experiences, situations, data, events, judgments, conventions, beliefs, rules, procedures, or criteria.