Although firms earn zero profits in the long run, why is the outcome from monopolistic competition considered to be inefficient?
A) Price exceeds marginal cost.
B) Quantity is lower than the perfectly competitive outcome.
C) Goods are not identical.
D) A and B are correct.
E) B and C are correct.
D
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The Chinese economic reforms of 1978 opened China to international trade and investment. These reforms gave China access to new capital and technology, which
A) allowed China to decrease its capital-labor ratio and increase labor productivity. B) increased China's total factor productivity and standard of living. C) accelerated Chinese productivity to a level where Chinese real GDP per capita is now on par with that in the United States. D) rapidly increased productivity in China and convinced Chinese officials to expand the reforms to include complete privatization of its financial system.
Which of the following is always associated with monopolistic competition?
A. identical products B. economic profits in the short run C. product differentiation D. Demand curves become more inelastic as new entry occurs.