Q4 "A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive." Is this statement correct? a. Yes, in the absence of entry barriers, firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves, just as in perfect competition. b. No, because firms in the monopolistically competitive market do not produce at an output level where MC = MR, as in perfect competition, which leads to a different price and output in long-run equilibrium. c. Yes, in the absence of entry barriers, new firms enter the industry until industry price and output are identical to perfect competition. d. No, firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve, whereas in perfect competition they earn zero profits. e. No, because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
Q4 "A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive." Is this statement correct? a. Yes, in the absence of entry barriers, firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves, just as in perfect competition. b. No, because firms in the monopolistically competitive market do not produce at an output level where MC = MR, as in perfect competition, which leads to a different price and output in long-run equilibrium. c. Yes, in the absence of entry barriers, new firms enter the industry until industry price and output are identical to perfect competition. d. No, firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve, whereas in perfect competition they earn zero profits. e. No, because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Q4
"A monopolistically competitive market in which there are no entry barriers will have the identical long-run equilibrium as if the market were perfectly competitive ." Is this statement correct?
a.
Yes, in the absence of entry barriers, firms in the monopolistically competitive market will expand until they are producing at the minimum of their LRAC curves, just as in perfect competition.
b.
No, because firms in the monopolistically competitive market do not produce at an output level where MC = MR, as in perfect competition, which leads to a different price and output in long-run equilibrium.
c.
Yes, in the absence of entry barriers, new firms enter the industry until industry price and output are identical to perfect competition.
d.
No, firms in the monopolistically competitive market earn economic profits in the long run because they are facing a downward-sloping demand curve, whereas in perfect competition they earn zero profits.
e.
No, because firms in the monopolistically competitive market will not reach their minimum efficient scale as they would in perfect competition - the result is higher prices and lower output.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education