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Characteristic of Both Monopolistic Competition and Perfect Competition

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Which of the following is a characteristic of both monopolistic competition and perfect competition?

1. Firms face singificant barriers to entry
2. A firm's marginal revenue curve is below its demand curve.
3. In the long run, a firm will earn zero economic profit.
4. In the long run, a firm will produce a level of output that corresponds to the minimum point of their average total cost curve.

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Solution Summary

A characteristic of both monopolistic competition and perfect competition is presented.

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Answer 3: In the long run, a firm will earn zero economic profit.

Since there exists "free entry and exit" in the long run in industries with monopolistic competition, in the long run the demand curve for monopolistic competition shifts inward and the firm is no longer ...

Solution provided by:
Jayant Kumar, MBA
Education
  • MBA, Indian Institute of Finance
  • Bsc, Madras University
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