The long-run equilibrium outcomes in monopolistic competition and perfect competition are similar because in both market structures ?
Correct answer: B. firms will only earn a normal profit
- A. the efficient output level will be produced in the long run
- B. firms will only earn a normal profit
- C. firms realize all economies of scale
- D. firms will be producing at minimum average cost
Explanation
Free entry and exit drive economic profit to zero in both structures, leaving firms with normal profit in long-run equilibrium. They are not otherwise alike in efficiency, since monopolistic-competition firms generally produce below minimum average cost.
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Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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