Which of the following is true in long-run equilibrium for a firm in monopolisti

Question

Which of the following is true in long-run equilibrium for a firm in monopolistic competition? Select one: O a. MC ATC b. MC> ATC d. Any of the above may be true. What characteristic of monopolistic competition may heip to offset the ineffciengy of this market structure? Select one: a. Free entry and exit imply that firms produce at minimum long-run average cost. b. Consumers may value the product diversity that allows them to choose from a wide variety of differentiated products. c. Consumers may feel better about the inefficiency if they know that firms earn zero profits. d consmers may tonopoly or monopn. In comparing Cournot equilibrium with competitive equilibrium Select one: O a. both profit and output level are higher in Cournot. O b. both profit and output level are higher in competitive equilibrium. O c. profit is higher, and output level is lower in competitive equilibrium. d. profit is higher, and output level is lower in Cournot.

Explanation / Answer

Q1) d Any of the above may be true because MC first lies below the ATC, then intersects ATC at the lowest point, and then rises above ATC.

Q2) c .is the correct option because consumers know that the firms earn no profit.Consumers will buy the product even if the price is raised because of the loyalty towards the brand they consume.

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