Figure: Profit Maximization in Monopolistic Competition (Figure: Profit

question 175

Multiple Choice

Figure: Profit Maximization in Monopolistic Competition (Figure: Profit Maximization in Monopolistic Competition) In panel B of the figure Profit Maximization in Monopolistic Competition, the long-run equilibrium will result in:

• A)economic profits = 0.
• B)accounting profits = 0.
• C)a tangency of the ATC curve with the MR curve.
• D)economic profits = 0 and a tangency of the ATC curve with the MR curve.

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Definitions:

Positive Economic Profit

The excess amount by which total revenue surpasses the total costs, including opportunity costs of production.

Perfectly Competitive

A market structure characterized by a large number of small firms, a homogeneous product, free entry and exit, and perfect information.

ATC

Average Total Cost, which is the total cost per unit of output produced, calculated by dividing the total cost by the quantity of output.

Marginal Cost

Marginal cost refers to the additional total cost incurred from the production of an extra unit of a good or service.