In Long-Run Equilibrium, Both Purely Competitive and Monopolistically Competitive Firms

question 161

Multiple Choice

In long-run equilibrium, both purely competitive and monopolistically competitive firms will

• A) produce at minimum average total cost.
• B) earn economic profits.
• C) achieve allocative efficiency.
• D) equate marginal cost and marginal revenue.

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Definitions:

MPC

Marginal Propensity to Consume refers to the fraction of any additional income that is used for consumption purposes.

Consumption

The act of households utilizing goods and services.

Disposable Income

The sum of funds that families can allocate to expenditure and savings once they've paid their income taxes.

MPC

The marginal propensity to consume, which represents the proportion of an increase in income that is spent on consumption rather than being saved.