Is a Monopolistically Competitive Firm Allocatively Efficient

question 216

Multiple Choice

Is a monopolistically competitive firm allocatively efficient?

• A)No, because it does not produce at minimum average total cost.
• B)Yes, because it produces where marginal cost equals marginal revenue.
• C)No, because price is greater than marginal cost.
• D)Yes, because price equals average total cost.

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Definitions:

Socialism

An economic institution characterized by state ownership and management of the basic industries.

Capitalism

An economic system characterized by private or corporate ownership of capital goods, investments determined by private decision, and prices, production, and distribution of goods determined primarily by competition in a free market.

Private Property

Property owned by individuals or companies, not by the state or public entities, and protected by law; includes both tangible and intangible assets.

Social Solidarity

The sense of unity and mutual support within a society, which binds individuals together and facilitates cooperation.