In What Way Does Long-Run Equilibrium Under Monopolistic Competition Differ

question 60

Multiple Choice

In what way does long-run equilibrium under monopolistic competition differ from long-run equilibrium under perfect competition?

• A)Firms in perfect competition achieve productive and allocative efficiency while firms in monopolistic competition achieve neither allocative nor productive efficiency.
• B)The only difference is that in a monopolistically competitive market there are many brands to choose from while in a perfectly competitive market there is one standard product.
• C)Firms in perfect competition achieve productive efficiency while firms in monopolistic competition achieve allocative efficiency.
• D)Firms in perfect competition achieve allocative efficiency while firms in monopolistic competition achieve brand efficiency.

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Definitions:

MC = ATC

This is the point where Marginal Cost equals Average Total Cost, typically illustrating the most efficient scale of production in the short run.

Perfectly Competitive

A market structure characterized by a large number of small firms, identical products, and free entry and exit, which leads to firms being price takers.

Smartphones

Mobile phones that offer advanced functionalities, including internet connectivity, apps, and touchscreen interface.

MC < ATC

A condition where the marginal cost of producing an additional unit is less than the average total cost, implying the company can lower its average total cost by increasing production.