Although both perfectly competitive and monopolistically competitive firms earn normal profits in the long run, monopolistically competitive firms will not
A)operate where price equals marginal cost
B)charge a higher price than firms in perfect competition
C)produce a smaller quantity than firms in perfect competition
D)produce where price equals average total cost
E)exit when demand falls below long-run average costs

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms have some market power and can charge a price that is higher than marginal cost. Therefore, they do not operate where price equals marginal cost, which is a characteristic of perfectly competitive markets.

Although Both Perfectly Competitive and Monopolistically Competitive Firms Earn Normal