If a Perfectly Competitive Firm and a Monopolistic Competitive Firm

question 117

Multiple Choice

If a perfectly competitive firm and a monopolistic competitive firm face the same demand and cost curves, then

• A)the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm will not.
• B)the perfectly competitive firm will attain resource-allocative efficiency, but the monopolistic competitive firm may or may not, depending upon the demand for its product.
• C)the perfectly competitive firm will not attain resource-allocative efficiency, but the monopolistic competitive firm will.
• D)both the perfectly competitive firm and the monopolistic competitive firm will attain resource-allocative efficiency.
• E)neither the perfectly competitive firm nor the monopolistic competitive firm will attain resource-allocative efficiency.

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Definitions:

Cash Flows

The aggregate sum of cash entering and leaving a business, critically impacting its financial fluidity.

Financing Activities

Transactions and events that affect a company's long-term liabilities and equity, including issuing debt, repaying loans, and distributing dividends, as reported in the cash flow statement.

Investing Activities

Transactions that pertain to the acquisition and disposal of long-term assets and investments not included in cash equivalents.

Cash Flow Statement

A financial document summarizing the total cash received from a company's operational activities and external financial sources, alongside all expenditures on business operations and investments over a specific timeframe.