Which of the following is TRUE?
A) For choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that of a firm in monopolistic competition, since they produce so that P MC.
B) In the long run in perfect competition, economic profits equal zero, and in monopolistic competition in the long run, economic profits are very large.
C) In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P MC and there is excess capacity.
D) In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

Question

Which of the following is TRUE?
A) For choosing the profit-maximizing quantity, the short-run decision-making process of a firm in perfect competition is the same as that of a firm in monopolistic competition, since they produce so that P > MC.
B) In the long run in perfect competition, economic profits equal zero, and in monopolistic competition in the long run, economic profits are very large.
C) In perfect competition, P = MC, and in monopolistic competition, MR = MC, but P > MC and there is excess capacity.
D) In both perfect competition and monopolistic competition, P equals minimum average total cost in the long run.

Quizplus · Accepted Answer

In perfect competition, firms produce where P = MC. In monopolistic competition, firms produce where MR = MC, but P > MC due to product differentiation, leading to excess capacity.

Which of the Following Is TRUE