Which is true of a firm in monopolistic competition in the long run, but not true of perfect competition in the long run?

Choose 1 answer:

A There are identical products.
B There is no economic profit.
(c) There are no barriers to entry.

D There is excess capacity.
(E) There is only one buyer.

Question

Which is true of a firm in monopolistic competition in the long run, but not true of perfect competition in the long run?

Choose 1 answer:

A There are identical products.
B There is no economic profit.
(c) There are no barriers to entry.

D There is excess capacity.
(E) There is only one buyer.

Accepted Answer

∻Solution∻ ‖ a ⋮ Identical Products: In perfect competition, firms produce identical products, while in monopolistic competition, products are differentiated. ‖ ‖ b ⋮ Economic Profit: In the long run, both monopolistic competition and perfect competition lead to no economic profit due to the entry and exit of firms. ‖ ‖ c ⋮ Barriers to Entry: Both market structures are characterized by no barriers to entry in the long run. ‖ ‖ d ⋮ Excess Capacity: Firms in monopolistic competition do not produce at minimum average total cost in the long run, leading to excess capacity. This is not the case in perfect competition, where firms produce where average total cost is minimized. ‖ ‖ e ⋮ Number of Buyers: The number of buyers is not a distinguishing feature between monopolistic competition and perfect competition; both have many buyers. ‖ ∻Answer∻ ⚹ D There is excess capacity. ⚹ ∻Key Concept∻ ⚹ Excess Capacity in Monopolistic Competition ⚹ ∻Explanation∻ ⚹ In monopolistic competition, firms have excess capacity in the long run because they do not produce at the minimum of the average total cost curve, unlike in perfect competition. ⚹◊What is the impact of excess capacity in monopolistic competition compared to perfect competition in the long run?⍭ Generate me a similar question◊

Sia