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For each of the following characteristics, say whether it describes a perfectly competitive firm, a monopolistically competitive firm, both, or neither
For each of the following characteristics, say whether it describes a perfectly competitive firm, a monopolistically competitive firm, both, or neither.
A. sells a product differentiated from that of its competitors
B. has marginal revenue less than price
C. earns economic profit in the long run
D. produces at the minimum of average total cost in the long run
E. equates marginal revenue and marginal cost
F. charges a price above marginal cost
Expert Solution
a. A monopoly sells a differentiated product, while a perfectly competitive firm does not.
b. A monopoly has marginal revenue less than price, while a perfectly competitive firm does not.
c. A monopoly has an economic profit in the long run, while a perfectly competitive firm does not.
d. A perfectly competitive firm produces at the average total cost in the long run, while a monopoly does not.
e. A monopoly equates marginal revenue and marginal cost, while a perfectly competitive firm does not.
f. A monopoly charges a price above marginal cost, while a perfectly competitive firm does not.
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