Monopolistically competitive firms:A) engage in collusive activity to maximize profit.B) are very similar to perfect competitors in producing at the minimum ATC.C) earn a positive economic profit if price is greater than ATC.D) will set price where MC MR.

Question

Monopolistically competitive firms:A) engage in collusive activity to maximize profit.B) are very similar to perfect competitors in producing at the minimum ATC.C) earn a positive economic profit if price is greater than ATC.D) will set price where MC > MR.

Fareeha Abiola · Accepted Answer

Final Answer : C, Explanation :  Monopolistically competitive firms can earn a positive economic profit if price is greater than average total cost (ATC) in the short run. However, in the long run, new firms may enter the market, leading to increased competition and reducing the economic profit to zero. Monopolistically competitive firms do not engage in collusive behavior as they have some market power, which allows them to differentiate their product from their competitors. They do not produce at the minimum ATC like perfect competitors as they are not price takers, but rather have some control over their price. They will set price where marginal cost (MC) equals marginal revenue (MR), but this price may be above the minimum ATC.

Monopolistically competitive firms:

A) engage in collusive activity to maximize profit.
B) are very similar to perfect competitors in producing at the minimum ATC.
C) earn a positive economic profit if price is greater than ATC.
D) will set price where MC > MR.

Definitions

Learning Objectives

Learning Objectives

Related questions