Use the following to answer question:
Figure: Comparing Long-Run Equilibriums
-(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is FALSE?
A)Firms in panel (a)cannot have profits in the long run,but those in panel (b)can.
B)Both panels show markets in which firms are covering all of their implicit and explicit costs.
C)Firms in the market shown in panel (a)produce identical products,whereas those in panel (b)produce similar but differentiated products.
D)Both firms show markets that have many firms.

Question

Use the following to answer question:
Figure: Comparing Long-Run Equilibriums 
-(Figure: Comparing Long-Run Equilibriums)Use Figure: Comparing Long-Run Equilibriums.Which statement is FALSE?
A)Firms in panel (a)cannot have profits in the long run,but those in panel (b)can. 
B)Both panels show markets in which firms are covering all of their implicit and explicit costs. 
C)Firms in the market shown in panel (a)produce identical products,whereas those in panel (b)produce similar but differentiated products. 
D)Both firms show markets that have many firms.

Quizplus · Accepted Answer

Firms in panel (b) can have profits in the long run, but those in panel (a) cannot. The figure shows that the demand curve in panel (b) is more elastic than in panel (a), indicating that firms in panel (b) have some market power to set prices above their average total cost and earn profits in the long run.

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