Consider a Monopolistically Competitive Industry in Long-Run Equilibrium

question 64

Multiple Choice

Consider a monopolistically competitive industry in long-run equilibrium.Will this industry be productively efficient?

• A)Yes.Since the firms are in long-run equilibrium,they will all be producing at the minimum of their LRAC curves.
• B)Yes.Since the firms are in long-run equilibrium,they will all be operating on their LRAC curves.
• C)Yes.In long-run equilibrium,each firm is producing at an output level where price is equal to marginal cost.
• D)No.Firms are selling their output at a level where price exceeds marginal cost and thus,by definition,cannot be productively efficient.
• E)No.Since firms are selling differentiated products and there is no industry-wide price,we cannot conclude that marginal cost will be equated across all firms.

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