Economists Have Long Debated Whether There Is a Significant Loss

question 223

Multiple Choice

Economists have long debated whether there is a significant loss of well-being to society in markets that are monopolistically competitive rather than perfectly competitive.Which of the following offers the best reason why some economists believe that monopolistically competitive markets are less efficient than perfectly competitive markets?

• A)In contrast to perfectly competitive markets, neither allocative efficiency nor productive efficiency are achieved in monopolistically competitive markets.
• B)In contrast to perfectly competitive markets, firms in monopolistically competitive markets earn economic profits in long-run equilibrium.
• C)In contrast to perfectly competitive markets, firms in monopolistically competitive markets do not produce where price equals average total cost in long-run equilibrium.
• D)In contrast to perfectly competitive markets, firms in monopolistically competitive markets can charge a price greater than average total cost in the short run.

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Definitions:

Probable Likelihood

This term refers to the high chance of occurrence or expectation that a specific event or outcome will happen.

Liability

Financial obligations or debts that a company or individual owes to others, required to be settled over time.

Accrual

Involves recording revenues and expenses when they are incurred, regardless of when cash transactions occur.

Disclosure

The act of making new or important information known, especially facts that may influence a decision or affect the perception of a situation.