Question

Which of the following is not true of both firms in monopolistic competition and firms in perfect​ competition? A. Both types of firms produce at minimum ATC. B. Both types of firms produce where MC​ = MR. C. Both types of firms have the possibility of​ short-run economic profits or losses. D. Both types of firms can earn zero economic profits in​ long-run equilibrium.

Answer 1

Answer:

 A. Both types of firms produce at minimum ATC.

Explanation:

A monopolistic competition is when there are many buyers and sellers of differentiated goods and services.

A monopolistic competition is characterised by little or no barriers to entry or exit of firms. In the short run, if a firm is earning economic profit, in the long run, firms enter into the industry and drive economic profit to zero. Also, if the short run, firms are earning economic loss, in the long run, firms would leave the industry and economic profit would be zero.

A monopolistic competition doesn't produce at minimum ATC and as a result it operates with excess capacity.

A perfect competition is characterised by many buyers and sellers of homogenous goods and services.

There are no barriers to entry or exit of firms into the industry. So firms make zero economic profit in the long run.

It produces at minimum atc and where Mr equals mc.

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