In the Long Run, a Firm in a Perfectly Competitive

question 411

Multiple Choice

In the long run, a firm in a perfectly competitive market operates

• A)at its efficient scale, and a monopolistically competitive firm operates at its efficient scale.
• B)at its efficient scale, and a monopolistically competitive firm operates with excess capacity.
• C)with excess capacity, and a monopolistically competitive firm operates with excess capacity.
• D)with excess capacity, and a monopolistically competitive firm operates at its efficient scale.

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Definitions:

Adverse Selection

A situation in which one party in a transaction has more or better information than the other, often leading to an imbalance and potentially unfavorable outcomes.

Hidden Characteristics

Traits or features of a product or service that are not immediately observable to the buyer, potentially leading to information asymmetry.

Psychology

The scientific study of the mind and behaviors, encompassing a wide range of topics from cognitive processes to social interactions.

Economic Behavior

The study of how individuals, households, and organizations make choices to allocate scarce resources.