Two firms, firm A and firm B, have identical cost curves.Firm A operates in perfect competition and firm B operates in monopolistic competition.In the long run, what can we say about the price and output that each firm charges?
A)Firm A's price will be lower than firm B's price, and firm A's output will be lower than firm B's output.
B)Firm A's price will be greater than firm B's price, and firm A's output will be greater than firm B's output.
C)Firm A's price will be greater than firm B's price, and firm A's output will be lower than firm B's output.
D)Firm A's price will be lower than firm B's price, and firm A's output will be greater than firm B's output.

Question

Quizplus · Accepted Answer

In perfect competition, firms are price takers and produce where price equals marginal cost, leading to lower prices and higher output. In monopolistic competition, firms have some pricing power, leading to higher prices and lower output compared to perfect competition.

Two Firms, Firm a and Firm B, Have Identical Cost