Refer to Figure 16-8. If this firm were operating in a perfectly competitive market in the long run, it would charge a price equal to point

A) I but in a monopolistically competitive market, the profit-maximizing price is C.
B) E but in a monopolistically competitive market, the profit-maximizing price is C.
C) C but in a monopolistically competitive market, the profit-maximizing price is G.
D) G but in a monopolistically competitive market, the profit-maximizing price is J.

Question

Alanna Clinkscales · Accepted Answer

Final Answer : B, Explanation :  In a perfectly competitive market, firms charge a price equal to their marginal cost in the long run, which corresponds to the lowest point on the average total cost curve (point E). In a monopolistically competitive market, firms have some degree of market power, allowing them to charge a price above marginal cost, typically where the marginal cost curve intersects the marginal revenue curve, which is represented by point C.

Definitions

Learning Objectives

Learning Objectives

Related questions