A monopolistically competitive firm differs from a perfectly competitive firm in the long run in that
A) the demand curve faced by a monopolistically competitive firm is downward sloping, while the demand curve faced by a perfectly competitive firm is horizontal.
B) profits are positive for a monopolistically competitive firm and zero for a perfectly competitive firm.
C) profits are zero for a monopolistically competitive firm and positive for a perfectly competitive firm.
D) marginal cost equals the market price for a monopolistically competitive firm but not for a perfectly competitive firm.
A
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You have responsibility for economic policy in the country of Freedonia. Recently, the neighboring country of Sylvania has cut off all exports of oranges to Freedonia. George, who is one of your advisors, says that the best way to avoid a shortage of oranges is to take no action at all. Charles, another one of your advisors, argues that without a binding price floor, a shortage will certainly
develop. Otto, a third advisor, suggests that you should impose a binding price ceiling in order to avoid a shortage of oranges. Which of your three advisors is most likely to have studied economics? a. George b. Charles c. Otto d. Apparently, all three advisors have studied economics, but their views on positive economics are different.
If it is NOT profitable for more than one firm to be in an industry, we have an example of
A) monopoly due to ownership of key resources. B) monopoly due to governmental entry restrictions. C) monopoly due to economies of scale. D) pure competition.