Consider the Following Statement: "A Monopolistically Competitive Market in Which

question 91

Multiple Choice

Consider the following statement: "A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive." Is this statement correct?

• A)No,because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
• B)No,because firms in the monopolistically competitive market do not produce at an output level where MC = MR,as in perfect competition,which leads to a different price and output in long-run equilibrium.
• C)No,firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve,whereas in perfect competition they earn zero profits.
• D)Yes,in the absence of entry barriers,new firms enter the industry until industry price and output are identical to perfect competition.
• E)Yes,in the absence of entry barriers,firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves,just as in perfect competition.

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Definitions:

Cognitive Dissonance

The mental discomfort experienced by an individual who holds contradictory beliefs, ideas, or values, leading to an internal conflict.

Purchase Anxiety

The apprehension or doubt a consumer may feel before making a purchase decision, often due to fear of making the wrong choice.

Consumer Cynicism

A sentiment or attitude of distrust towards marketing practices, where consumers doubt the honesty or integrity of advertisements and promotions.

Subliminal Perception

The process by which individuals respond to stimulus that they are not consciously aware of, influencing their behavior or thought process unknowingly.