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:

Utopian Socialist

Refers to early social theorists and thinkers who envisioned ideal societies with perfect equality and social justice, without the class divisions that characterized the industrial society of their time.

Etienne Cabet

A French philosopher and socialist who advocated for communal living and is known for his utopian novel "Voyage to Icaria."

Voyage to Icaria

A utopian work and a social experiment envisioned by Étienne Cabet, portraying an ideal society on a fictional island, reflecting communist ideologies.