With Regard to the Long-Run Equilibrium in the Two Market

question 39

Multiple Choice

With regard to the long-run equilibrium in the two market structures,the higher unit costs in monopolistic competition relative to perfect competition implies that

• A)society would be better off if there were fewer,and more homogeneous,goods produced at the scale at which average costs are minimized.
• B)resources are being used inefficiently in perfect competition.
• C)there is a tradeoff between product variety and the ability to minimize cost per unit.
• D)firms are restricting output to extract positive economic profits.
• E)the government should force monopolistically competitive firms to behave like perfectly competitive firms.

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Definitions:

Tax Rate

The percentage at which an individual or corporation is taxed, which can vary based on income levels, jurisdictions, and other factors.

WACC

The Weighted Average Cost of Capital is a metric that determines a firm's cost of capital by assigning proportional weights to each type of capital it uses.

Net Investment

The total amount invested in a project or asset after accounting for depreciation or amortization.

Working Capital

The difference between a company's current assets and its current liabilities, indicating short-term financial health.