Which of the Following Statements Regarding Monopolistic Competition Is Not

question 395

Multiple Choice

Which of the following statements regarding monopolistic competition is not correct?

• A)In the long-run equilibrium, price equals average total cost.
• B)In the long-run equilibrium, firms earn zero economic profit.
• C)In the long-run equilibrium, firms charge a price above marginal cost.
• D)In the long-run equilibrium, firms produce a quantity in excess of their efficient scale.

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Definitions:

Price of X

The cost associated with acquiring a unit of good or service X.

Utility Function

An economic model that measures preferences over a set of goods and services.

Budget Constraint

An economic model that represents all the combinations of goods and services a consumer can purchase given their income and the prices of those goods and services.

Bundle

A collection of goods or services that are sold together.