Asked by Abdullah Elalami on Apr 24, 2024
Verified
Perfect competitors and monopolistic competitors both earn _____ economic profit in the long run,but perfect competitors produce at the _____ of the ATC curve,while monopolistic competitors produce _____ of the ATC curve.
A) zero;minimum point;on the downward-sloping portion
B) positive;minimum point;on the upward-sloping portion
C) negative;minimum point;at the minimum point
D) zero;downward-sloping portion;at the minimum point
Perfect Competitors
Firms that are so numerous and small in relation to the market they serve that they have no power to alter the market price of their product, characterized by a lack of market dominance.
Economic Profit
Profit exceeding the opportunity cost of resources used, indicating a return greater than the most lucrative alternative.
ATC Curve
Refers to the Average Total Cost curve, which represents the average cost per unit of output, calculated by dividing total cost by the quantity of output produced.
- Understand the differences between monopolistic competition and perfect competition in terms of economic profits and points of production on the ATC curve.
- Analyze the long-term economic profit outcomes for monopolistic competitors versus perfect competitors.
Verified Answer
ZK
Zybrea KnightMay 02, 2024
Final Answer :
A
Explanation :
Perfect competitors and monopolistic competitors both earn zero economic profit in the long run due to firms being able to enter or exit the market. However, perfect competitors produce at the minimum point of the ATC curve where price equals marginal cost, while monopolistic competitors produce at a point where price is greater than marginal cost, but still on the downward-sloping portion of the ATC curve.
Learning Objectives
- Understand the differences between monopolistic competition and perfect competition in terms of economic profits and points of production on the ATC curve.
- Analyze the long-term economic profit outcomes for monopolistic competitors versus perfect competitors.