Which of these is likely to be true of perfect competition but not of monopoly?
A)A firm can produce a good only if government licenses authorize it to produce the good.
B)A firm can sell a good in the market only if the government grants a patent to the firm.
C)A firm can earn economic profit in the long run.
D)A firm can shut down in the short run only if the price charged by it exceeds the average variable cost of production.
E)A firm can face competition from new entrants into the market in the long run.

Question

Quizplus · Accepted Answer

Perfect competition is characterized by free entry and exit of firms in the long run. New firms can enter the market and compete with existing firms, which keeps firms from earning economic profit in the long run. In contrast, a monopoly has significant barriers to entry, which prevent new firms from entering the market and competing. Therefore, a monopoly is unlikely to face competition from new entrants in the long run. The other options (A, B, C, and D) are not true of either perfect competition or monopoly.

Which of These Is Likely to Be True of Perfect