MS2

Which of the following is true of a monopolistically competitive firm in long-run equilibrium? 

• Price equals marginal cost and average total cost. 
• Price equals average total cost but is greater than marginal cost. 
• Price equals marginal cost and is greater than average total cost. 
• The firm earns positive economic profits by producing at minimum average cost. 

The graph shows a monopolistically competitive firm:

• making a profit in the short-run
• incurring a loss in the short-run
• making a profit in the long-run
• breaking even in the long-run

In the long-run, the ATC will be tangent to the demand curve at:

• Q1
• Q2
• Q3
• none of the above

Which of the following is true of a monopolistically competitive firm in long-run equilibrium? 

• The firm produces the allocatively efficient level of output. 
• The firm produces an output level that minimizes average total cost. 
• The firm produces in the inelastic range of its demand curve. 
• The firm is allocatively inefficient, because it produces an output level at which price is greater than marginal cost. 

Let P = price, MR = marginal revenue,
MC = marginal cost, and ATC = average total cost. In monopolistic competition, which of the following most accurately describes the long-run equilibrium conditions for a firm? 

• P>ATC, MR=MC, and P>MC 
• P=ATC, MR=MC, and P=MC 
• P=ATC, MR=MC, and P>MC 
• P=ATC, MR>MC, and P>MC 

• A

• B

• C

• D

• A

• B

• C

• D

• A

• B

• C

• D

• A

• B

• C

• D

• A

• B

• C

• D