Which of the Following Is True About Long-Run Equilibrium in a Monopolistically

question 4

Multiple Choice

Which of the following is true about long-run equilibrium in a monopolistically competitive market?

• A) Firms earn zero economic profit because price equals long-run average cost, but the equilibrium is not allocatively efficient because price exceeds the marginal cost of the last unit produced.
• B) They may earn negative, zero, or positive economic profit because monopolistically competitive firms are price takers.
• C) Each firm faces a perfectly elastic demand curve and earns zero economic profit because price equals long-run average cost, and are allocatively efficient because price equals marginal cost for the last unit sold.
• D) None of the above are correct.

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Definitions:

Confirmation Biases

A cognitive bias that involves favoring information that confirms pre-existing beliefs or hypotheses.

Dependent Variable

The variable in an experiment that is expected to change in response to manipulations of the independent variable.

Independent Variable

In an experiment, the variable that is manipulated or changed by the researcher to observe its effects on the dependent variable.

Experimenter

An individual who conducts an experiment, usually in a scientific context, to test hypotheses and investigate phenomena.