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Figure: Firms in Monopolistic Competition
-(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _____ in panel _____.

Question

Use the following to answer questions :
Figure: Firms in Monopolistic Competition 
-(Figure: Firms in Monopolistic Competition)Use Figure: Firms in Monopolistic Competition.A long-run equilibrium is illustrated at the profit-maximizing price _____ in panel _____.

Quizplus · Accepted Answer

In a long-run equilibrium, firms in monopolistic competition set their prices at the point where marginal revenue equals marginal cost, which is represented by the intersection of the demand curve and the average total cost curve. In panel (b), this occurs at point H, where the marginal cost curve intersects the demand curve, resulting in a price of P2 and quantity of Q2. This is the profit-maximizing price in the long-run equilibrium. Therefore, the correct choice is C.

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