Which of the following suggests that the soda market is not in a competitive lon
ID: 1200815 • Letter: W
Question
Which of the following suggests that the soda market is not in a competitive long-run equilibrium (circle all that apply)?
Coke and Pepsi sell different quantities of soda.
Coke earns higher accounting profits than Pepsi.
Coke and Pepsi charge different prices.
Coke and Pepsi have different marginal cost curves.
Supply of both Coke and Pepsi is very inelastic.
A.Coke and Pepsi sell different quantities of soda.
B.Coke earns higher accounting profits than Pepsi.
C.Coke and Pepsi charge different prices.
D.Coke and Pepsi have different marginal cost curves.
E.Supply of both Coke and Pepsi is very inelastic.
Explanation / Answer
Option (B).
In competitive long run equilibrium, firms cannot earn excess profit and all firms in the industry must be earning only normal profit (zero economic profits). Here, Coke is earning higher accounting profits than Pepsi, therefore this is not a long run equilibrium situation.
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