How Does the Long-Run Equilibrium of a Monopolistically Competitive Industry

question 54

Multiple Choice

How does the long-run equilibrium of a monopolistically competitive industry differ from that of a perfectly competitive industry?

• A)A firm in monopolistic competition will earn economic profits but a firm in perfect competition earns zero profit.
• B)A firm in monopolistic competition will charge a price higher than the average cost of production but a firm in perfect competition charges a price equal to the average cost of production.
• C)A firm in monopolistic competition does not take full advantage of its economies of scale but a firm in perfect competition produces at the lowest average cost possible.
• D)A firm in monopolistic competition produces an allocatively efficient output level while a firm in perfect competition produces a productively efficient output level.

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Definitions:

Approach-Avoidance Conflicts

Psychological conflicts arising when a single goal or situation has both appealing and unappealing aspects.

Behavioural Responses

The observable reactions or actions of an organism in response to external or internal stimuli.

Vacillation

The state of being unable to make a choice among various viewpoints or courses of action; hesitation.

Objective Appraisals

The evaluation of something based on unbiased facts and observations, rather than personal feelings or opinions.