How Does the Long-Run Equilibrium of a Monopolistically Competitive Industry

question 54

Multiple Choice

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

• A)A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit.
• B)A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production.
• C)A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.
• D)A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

---

Definitions:

Arithmetic

A branch of mathematics dealing with numbers and basic operations such as addition, subtraction, multiplication, and division.

Common Difference

The constant difference between successive terms of an arithmetic sequence.

Sequence

A set of numbers arranged in a specific order, where each number is related to one or more numbers before/after it according to a specific rule.

Sigma Notation

A concise way of expressing a sum of terms using the Greek letter sigma (Σ), indicating a series to be added together.