Asked by Vansh Arora on Jul 03, 2024
Verified
In long-run equilibrium, monopolistic competition entails
A) an efficient allocation of resources.
B) an overallocation of resources due to inadequate capacity.
C) an underallocation of resources due to excess capacity.
D) production at the minimum attainable average total cost.
Long-Run Equilibrium
A state in which all firms in a perfectly competitive market achieve economic equilibrium, where no firm has an incentive to change its output and all adjustments have been made.
Excess Capacity
A situation where a firm is producing less than the maximum possible output due to insufficient demand or other factors.
Monopolistic Competition
A market structure characterized by many firms offering products that are similar but not identical, leading to competition on factors other than price.
- Comprehend the notion of surplus capability and its consequences for distributing resources in a market characterized by monopolistic competition.
Verified Answer
Learning Objectives
- Comprehend the notion of surplus capability and its consequences for distributing resources in a market characterized by monopolistic competition.
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