Use the following to answer questions:
Figure: Comparing Long-Run Equilibriums
-(Figure: Comparing Long-Run Equilibriums) Look at the figure Comparing Long-Run Equilibriums. Which of the following statements is FALSE?
A) Firms in panel (A) cannot have excess profits in the long run, but those in panel (B) can.
B) Both panels show markets in which firms are covering all of their implicit and explicit costs.
C) Firms in the market shown in panel (A) produce identical products, whereas those in panel (
B) produce similar but differentiated products.
D) Both firms show markets that have many firms.

Question

Use the following to answer questions:
Figure: Comparing Long-Run Equilibriums 
-(Figure: Comparing Long-Run Equilibriums) Look at the figure Comparing Long-Run Equilibriums. Which of the following statements is FALSE?
A) Firms in panel (A) cannot have excess profits in the long run, but those in panel (B) can.
B) Both panels show markets in which firms are covering all of their implicit and explicit costs.
C) Firms in the market shown in panel (A) produce identical products, whereas those in panel (
B) produce similar but differentiated products. 
D) Both firms show markets that have many firms.

Quizplus · Accepted Answer

In the long run, firms in both perfectly competitive markets (panel A) and monopolistically competitive markets (panel B) cannot have excess profits due to the entry of new firms, which drives profits to zero.

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