If a Perfectly Competitive Firm and a Monopolistic Competitor in Long

question 36

Multiple Choice

If a perfectly competitive firm and a monopolistic competitor in long run equilibrium face exactly the same demand and cost curves, then there is high probability that

• A)the former will earn zero economic profits, but the latter will earn positive economic profits.
• B)both will earn zero economic profits, but the former will attain lower unit costs than the latter.
• C)both will earn zero economic profits, but the latter will attain lower unit costs than the former.
• D)both firms will earn zero economic profits, and attain the lowest possible unit costs.
• E)neither firm will earn zero economic profits, but both will attain the lowest possible unit costs.

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Definitions:

Sum

The result of adding two or more numbers together.

Even Integers

Whole numbers that are divisible by 2.

Estimate Time

Approximating the duration that a task or activity is expected to take.

Geometric Sequence

A sequence of numbers where each term after the first is found by multiplying the previous one by a fixed, non-zero number called the ratio.