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What are the features that are shared by monopolies monopolistic competition and perfect competition? Choose two.

Rationale

The firm(s) can earn economic profits in the short run and maximum profit occurs when marginal revenue equals marginal cost.

In monopolies, monopolistic competition, and perfect competition, firms can earn economic profits in the short run due to limited competition or market power. Additionally, all market structures maximize profits where marginal revenue equals marginal cost, regardless of the type of competition.

A (The price of a unit is greater than the marginal cost.) YOUR ANSWER

This statement is not universally true for all market structures. In perfect competition, firms are price takers, and the price equals marginal cost at equilibrium. Therefore, while this may hold for monopolies and monopolistic competition, it does not represent a shared feature across all three.

B (The firm(s) can earn economic profits in the short run.) CORRECT

This is a characteristic shared by all three market structures. In the short run, monopolies can leverage their market power, while firms in monopolistic competition may differentiate their products to earn profits, and even firms in perfect competition can experience profits temporarily if market prices rise above costs.

C (The structure does not produce welfare-maximizing level of output.) YOUR ANSWER

While monopolies and monopolistic competition often produce less than the welfare-maximizing output, perfect competition does achieve this level by producing where price equals marginal cost. Thus, this feature is not shared among all three market structures.

D (In the long run new firms can easily enter the market.) YOUR ANSWER

This is characteristic only of perfect competition and monopolistic competition, where there are low barriers to entry. Monopolies, however, are defined by high barriers, preventing new firms from entering the market easily.

E (in the long run, it is nearl impossible for new firms to enter.) YOUR ANSWER

This statement applies specifically to monopolies due to significant barriers to entry. In contrast, monopolistic competition allows for new firms to enter the market in the long run.

F (maximum profit occurs when marginal revenue equals marginal cost) CORRECT

This principle is applicable across all market structures. Regardless of the level of competition, firms maximize profits at the point where their marginal revenue equals marginal cost, making it a shared feature.

Conclusion

In summary, the ability to earn economic profits in the short run and the condition for profit maximization at the intersection of marginal revenue and marginal cost are fundamental features shared by monopolies, monopolistic competition, and perfect competition. Understanding these characteristics helps to differentiate the behavior of firms in varying market structures and informs economic analysis and policy decisions.

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