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In the long run for a monopolistically competitive firm:

A) price is equal to the average cost of production.
B) firms earn economic profits.
C) firms earn economic losses.
D) price is equal to the minimum possible average cost of production.

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Darryn D'Souza
Darryn D'SouzaLv10
22 Feb 2021

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Related questions

Consider an industry with a small number of firms with market power. Suppose they sell identical products and have an identical cost of production. If each firm posts a price without knowing the prices posted by its rivals, and it is impossible for them to collude, then:

A. Firms will charge prices equal (or almost equal) to the marginal cost of production.
B. Firms will make zero (or close to zero) economic profits.
C. Firms will have incentives to invest in product differentiation.
D. All of the above.

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

Tell whether the following is true or false and explain why.

a. In the long-run, purely competitive firms and monopolistically competitive firms earn zero economic profit (normal profit) and both will produce allocatively efficient outputs.

b. Monopolistically competitive firms and oligopoly firms typically earn zero economic profit in the long-run.

c. The kinked demand model of oligopoly allows for the possibility that cost functions, including marginal cost, can shift without changing the quantity and price of profit-maximizing output.

d. Non-price competition refers to reductions in production costs that are not reflected in price reductions.

e. If a natural monopolist engages in marginal cost pricing, it typically will earn abnormal profits.

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