Question

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is...

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

A) The firm is making zero economic profit.

B) The firm produces the quantity of output for which marginal revenue equals marginal cost.

C) The average total cost equals the price.

D) The firm produces the quantity at which the marginal revenue curve intersects the demand curve.

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Answer #1

Which of the following statements regarding the long run for a profit-maximizing monopolistically competitive firm is FALSE?

A) The firm is making zero economic profit.

True. As abnormal profit attracts new entrants in the market in short run, so in long run firms make normal economic profit.

B) The firm produces the quantity of output for which marginal revenue equals marginal cost.

True. Quantity will be decided when marginal cost curve intersects with marginal revenue curve.

C) The average total cost equals the price.

True. In long run ATC will be equal to price.

D) The firm produces the quantity at which the marginal revenue curve intersects the demand curve.

False. Price and quantity will be determined by the intersection of marginal revenue and marginal cost curve.

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