Which of the Following Is FALSE About a Comparison Between

question 22

Multiple Choice

Which of the following is FALSE about a comparison between a perfectly competitive firm and a monopolistically competitive firm?

• A) A perfectly competitive firm has a horizontal demand curve, while a monopolistically competitive firm has a downward sloping demand curve.
• B) In the short run, a perfectly competitive firm will earn zero economic profits, while a monopolistically competitive firm will earn positive economic profits.
• C) Both the perfectly competitive and monopolistically competitive firm will earn economic profits equal to zero in the long-run.
• D) In the long run, the perfectly competitive firm will produce at the minimum of the average total cost curve, while the monopolistically competitive firm will produce to the left of the minimum of the average total cost curve.

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Definitions:

Relevant Range

The range of activity within which the assumptions about fixed and variable costs are valid. Beyond this range, cost behaviors may change.

Per Unit Basis

A method of cost allocation or measurement that divides a total by the number of units to find the cost per unit.

Fixed Production Costs

Manufacturing costs that remain constant regardless of the level of production, such as rent and salaries of permanent staff.

Per Unit

A term that describes costs or revenues on a single unit basis.