The markets for Products X and Y both have many sellers, each earning an economic profit of zero in the long run. One of the markets is perfectly competitive while the other is monopolistically competitive. Which of the following information can help you determine which operates in a monopolistically competitive market structure?
A) There is easy entry into the market for Product X.
B) The firms selling product Y choose the profit-maximizing quantity where MR = MC.
C) The price for Product X is higher than the marginal cost at the profit-maximizing quantity.
D) The price for Product Y is equal to the average total cost at the long-run equilibrium quantity.

Question

Quizplus · Accepted Answer

The fact that the price for Product X is higher than its marginal cost suggests that it is produced in a monopolistically competitive market, where firms have some market power and are able to charge a price above their marginal cost. In a perfectly competitive market, the price would be equal to the marginal cost. The other options are not sufficient to determine the market structure.

The Markets for Products X and Y Both Have Many