Asked by Nikos Xydakis on Jul 02, 2024

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When a monopolistically competitive firm is in long-run equilibrium:

A) P = MC = ATC.
B) MR = MC and minimum ATC > P.
C) MR > MC and P = minimum ATC.
D) MR = MC and P > minimum ATC.

MR

Stands for Marginal Revenue, which is the additional revenue gained from selling one more unit of a product or service.

MC

Short for Marginal Cost, it refers to the increase in total cost that arises from producing one additional unit of a good or service.

Minimum ATC

The point at which the average total cost of production is at its lowest, indicating the most efficient scale of production.

  • Acquire knowledge on the subject of long-run equilibrium in markets with monopolistic competition.
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CA
Chris Adams7 days ago
Final Answer :
D
Explanation :
In the long run, under monopolistic competition, a firm will produce at the point where MR = MC to maximize profits. However, due to the presence of differentiated products, the firm will not be able to charge the perfectly competitive price (minimum ATC). Therefore, in the long-run equilibrium, P will be greater than the minimum ATC, and equal to the firm's average revenue (AR). Thus, the correct choice is D, where MR = MC and P > minimum ATC.