Questions
AP Economics-Hillebrand Micro Unit 4 Exam v2- Requires Respondus LockDown Browser
Single choice
Which of the following statements is true for both a monopolistically competitive firm and a perfectly competitive firm in long-run profit-maximizing equilibrium?
Options
A.Economic profits equal zero, and marginal revenue equals marginal cost.
B.Economic profits equal zero, and price equals marginal cost.
C.Economic profits equal zero, and price exceeds marginal cost.
D.Economic profits equal zero, and price equals marginal revenue.
E.Marginal revenue equals marginal cost, and profits are positive.
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Step-by-Step Analysis
First, let’s restate what the question is asking: in the long-run profit-maximizing equilibrium, which statement is true for both a monopolistically competitive firm and a perfectly competitive firm?
Option 1: 'Economic profits equal zero, and marginal revenue equals marginal cost.' This aligns with the general outcome in the long run for both market structures: firms earn zero economic profit due to entry/exit adjustments, and the profit-maximizing condition ......Login to view full explanationLog in for full answers
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