Which of the following statements is true?
A)The monopolistic competitor, like the perfectly competitive firm, is resource-allocative efficient.
B)The monopolistic competitor produces that quantity of output at which price equals marginal cost.
C)The monopolistic competitor produces the quantity of output with the lowest per-unit costs.
D)The monopolistic competitor most likely not earn economic profits in the long run.

Question

Quizplus · Accepted Answer

Monopolistic competitors are not resource-allocative efficient because they produce at a point where price is greater than marginal cost. They also do not produce the quantity with the lowest per-unit costs due to the differentiation of their products. In the long run, monopolistic competitors will not earn economic profits because new firms will enter the market and compete with them, reducing demand for their products and driving down prices.

Which of the Following Statements Is True