Answer
A. Monopolistically competitive
B. Monopolistically competitive
C. Neither
D. Perfect competition
E. Both
f. Monopolistically competitive
Work Step by Step
A. A perfectly competitive firm sells a standardized product that is the exact same as all of its competitors.
B. A monopolistically competitive firm must lower the price on all units of their product to sell additional units, so marginal revenue is less than price.
C. Neither earn economic profit in the long run, because there are low barriers of entry in both markets. In the long run, the number of sellers always adjusts so that sellers earn 0 economic profit.
D. ATC hits MC at its lowest point. Since a perfectly competitive firm produces where MR and MC cross, they must also produce at the lowest ATC.
E. To maximize profit, firms in both markets produce where marginal revenue meets marginal cost.
f. A monopolistically competitive firm must lower the price on all units of their product to sell additional units, so marginal revenue is always less than price. Since they produce where MR meets MC, their price is higher than MC.
