Asked by Bryanna Garcia on Jul 11, 2024
Verified
In long-run equilibrium,a firm in monopolistic competition is similar to a monopoly because it:
A) earns no economic profit.
B) charges a price equal to marginal cost.
C) charges a price greater than marginal cost.
D) charges a price equal to average total cost.
Monopolistic Competition
A market structure characterized by many firms offering differentiated products or services.
Long-Run Equilibrium
A state in which all firms in a market or industry are making normal profits, with no incentive for entry or exit, and all resources are optimally allocated.
- Examine the properties of firms in long-run equilibrium within perfect and monopolistic competitive markets.
Verified Answer
KM
Kristina MatosJul 14, 2024
Final Answer :
C
Explanation :
In the long-run equilibrium, a firm in monopolistic competition produces at a quantity where marginal revenue equals marginal cost, which is less than the quantity at which average total cost is minimized. Therefore, the firm charges a price greater than marginal cost, as it has some market power due to product differentiation. As a result, it earns a normal profit, but not zero economic profit, similar to a monopoly.
Learning Objectives
- Examine the properties of firms in long-run equilibrium within perfect and monopolistic competitive markets.
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