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:

Fourteenth Amendment

1868 constitutional amendment that guaranteed rights of citizenship to former slaves, in words similar to those of the Civil Rights Act of 1866.

Federal Government

The federal government is the national level of government, with powers divided between it and the individual states, as outlined in a country's constitution.

Immigration Policies

The laws, regulations, and directives that govern how and when people from other countries can enter, reside in, and sometimes become citizens of another country.

Free Trade

The belief that economic development arises from the exchange of goods between different countries without governmental interference.