The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-One major similarity between perfect competition and monopolistic competition is that:
A)the firms earn above normal profits in the long run.
B)the firms are price makers.
C)the firms produce identical products.
D)the firms just break even in the long run.
E)entry of firms is barred in the long run.

Question

The figure given below shows the revenue and cost curves of a monopolistically competitive firm.Figure 12.4
  MR: Marginal revenue curve
ATC: Average total cost curve
MC: Marginal cost curve
-One major similarity between perfect competition and monopolistic competition is that:
A)the firms earn above normal profits in the long run. 
B)the firms are price makers. 
C)the firms produce identical products. 
D)the firms just break even in the long run. 
E)entry of firms is barred in the long run.

Quizplus · Accepted Answer

One major similarity between perfect competition and monopolistic competition is that firms just break even in the long run. This is because in both market structures, firms can enter and exit freely which drives prices down to the point where firms earn zero economic profit. In the long run, monopolistically competitive firms will produce at the minimum point of their average total cost curve where price equals average total cost, which means they will break even. This is the same as perfect competition, where firms also produce at the minimum point of their average total cost curve and earn zero economic profit in the long run.

The Figure Given Below Shows the Revenue and Cost Curves