Suppose a Monopolistically Competitive Firm Is in Long-Run Equilibrium

question 98

Multiple Choice

Suppose a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35,where average cost is $50.Which of the following is true?

• A)This firm maximizes profit at an output level of 25 units.
• B)This firm maximizes profit at an output level of 35 units.
• C)This firm maximizes profit at an output level lower than 25 units.
• D)This firm maximizes profit at an output level greater than 35 units.
• E)This firm incurs an economic loss in the long run.

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Definitions:

Reflect

To display, show, or be indicative of something.

Profit Maximization

A financial strategy aimed at increasing a business's surplus by reducing costs or enhancing revenue.

Ethical Behavior

Refers to actions or practices that are morally upright and adhere to widely accepted moral principles or standards.

Outcome-Based Ethics

An ethical philosophy that focuses on the impacts of a decision on society or on key stakeholders.