Suppose that a monopolistically competitive firm is in long-run equilibrium. The firm's demand curve is tangent to its average cost curve at Q = 25 . Average cost is minimized at Q = 35, where average cost is $50 . Which of the following is true?
a. This firm maximizes profit at an output level of 25 units.
b. This firm maximizes profit at an output level of 35 units.
c. This firm maximizes profit at an output level less than 25 units.
d. This firm maximizes profit at an output level greater than 35 units.
e. There is not enough information to find the firm's profit-maximizing level of output.
A
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In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________
A) both inflation and output return to the original long-run equilibrium values B) inflation is permanently increased, while output returns to potential output C) output returns to potential output, while inflation may be higher or lower than its initial value D) inflation is permanently reduced, while output returns to potential output E) none of the above
A market equilibrium occurs
A) only with government regulation. B) only because of the profit motive of firms. C) only because of the complacency of consumers. D) through the interaction of self-interested consumers and producers.