Which of the Following Is True

question 183

Multiple Choice

Which of the following is true?

• A)When choosing the profit-maximizing quantity, the short-run decision-making process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where P > MC.
• B)In the long run in perfect competition, economic profits = 0, and in monopolistic competition in the long run, economic profits are very large.
• C)In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity.
• D)In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

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Definitions:

Average Variable Cost

The total variable cost of production divided by the number of units produced, indicating the variable cost per unit.

Break-even Point

The point at which total cost and total revenue are equal, meaning there is no profit or loss.

Average Total Cost (ATC)

Total cost divided by output.

Average Variable Cost (AVC)

Variable cost divided by output.