In Long-Run Equilibrium, Output Is Expanded to the Minimum Long-Run

question 18

Multiple Choice

In long-run equilibrium, output is expanded to the minimum long-run average total cost by:

• A) perfectly competitive firms but not by monopolistically competitive firms.
• B) monopolistically competitive firms but not by perfectly competitive firms.
• C) both monopolistically competitive firms and perfectly competitive firms.
• D) neither perfectly competitive firms nor monopolistically competitive firms.

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Definitions:

Production Possibilities Curve

A graphical representation showing the maximum quantity of goods and services that a society can produce with existing resources and technology, underlining the concept of opportunity cost.

Consumer Goods

Goods produced for direct consumption by the end customer, as opposed to goods used in the production of other goods.

Capital Goods

Physical assets that are used in the production of other goods and services and have a life expectancy of more than one year.

Production Possibilities Curve

A graphical representation that shows the maximum number of goods or services that can be produced efficiently with limited resources.