Which of the following is (are) true?
A) When choosing the profit-maximizing quantity, the short-run decisionmaking process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where MR = MC.
B) In the long run in perfect competition economic profits = 0, and in monopolistic competition in the long-run economic profits are = 0.
C) In perfect competition P = MC and in monopolistic competition, MR = MC, but P MC and there is excess capacity.
D) All of the above are true.

Question

Which of the following is (are) true?
A) When choosing the profit-maximizing quantity, the short-run decisionmaking process for a firm in perfect competition and a firm in monopolistic competition is the same, since they produce the quantity where MR = MC.
B) In the long run in perfect competition economic profits = 0, and in monopolistic competition in the long-run economic profits are = 0.
C) In perfect competition P = MC and in monopolistic competition, MR = MC, but P > MC and there is excess capacity.
D) All of the above are true.

Quizplus · Accepted Answer

All the statements provided are correct. Both perfect and monopolistic competition firms maximize profits where marginal revenue equals marginal cost (MR = MC). In the long run, firms in both types of markets earn zero economic profits due to entry and exit. In perfect competition, price equals marginal cost (P = MC) at equilibrium, while in monopolistic competition, price exceeds marginal cost (P > MC), leading to excess capacity.

Which of the Following Is (Are) True