Question

In a long-run equilibrium,

a. neither a competitive firm nor a monopolistically competitive firm charges a markup over marginal cost.
b. only a monopolistically competitive firm operates at its efficient scale.
c. both a perfectly competitive firm and a monopolistically competitive firm operate at their efficient scale of production.
d. only a perfectly competitive firm operates at its efficient scale.3

Answer 1

Answer: Option (d) is correct.

Step-by-step explanation:

Correct option: Only a perfectly competitive firm operates at its efficient scale.

In the perfectly competitive market and in the long run, the firms who are making losses will exit the market and those firms who are able produce at a point where price is equal to the average total cost will exist in the market.

However, monopolistic firms operates at a below efficient level of production and with an excess capacity.

Competitive firms are generally enjoys the productive efficiency in the long run because these firms have the capability to produce at a lower average total cost.