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Which is true of pure competition but not of monopolistic competition?
A) There are no significant barriers to entry.
B) Long-run economic profits are zero.
C) There are a large number of firms in the market.
D) Long-run equilibrium occurs at the minimum point on the ATC curve.
Pure Competition
A market structure characterized by a large number of small firms, identical products, and free entry and exit, leading to price taking behavior.
Monopolistic Competition
A market structure where many firms sell products that are similar but not identical, leading to competition based on quality, price, and marketing.
Economic Profits
The surplus or financial gains achieved by a firm or an individual after accounting for all explicit and implicit costs.
- Gain insight into monopolistic competition and understand how it diverges from pure competition.
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Learning Objectives
- Gain insight into monopolistic competition and understand how it diverges from pure competition.
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