Long-run equilibrium in perfect competition and in monopolistic competition are similar because in both, firms:
A)produce at the minimum point of the average total cost curve.
B)set price equal to marginal cost.
C)make zero economic profits.
D)have excess capacity.

Question

Quizplus · Accepted Answer

In both perfect competition and monopolistic competition, firms make zero economic profits in the long run, meaning that their revenues just cover their costs of production. However, the other choices are not necessarily true for both types of competition. In perfect competition, firms produce where price equals marginal cost, while in monopolistic competition, firms produce where marginal revenue equals marginal cost, which may not necessarily be equal to price. Additionally, firms in perfect competition may or may not have excess capacity, while firms in monopolistic competition typically have excess capacity due to their ability to differentiate their products.

Long-Run Equilibrium in Perfect Competition and in Monopolistic Competition Are