In the long run,the firm in monopolistic competition

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In monopolistic competition, the firm produces less than the quantity at minimum ATC in the long run because it faces downward sloping demand curve due to product differentiation. The firm sets a markup price over the marginal cost, which reduces the quantity demanded relative to perfect competition. As a result, the firm operates at a point where marginal revenue (MR) equals marginal cost (MC) but produces below the minimum efficient scale (MES) to avoid excessive costs. This leads to a higher average cost and lower output level compared to perfect competition. In the long run, the firm earns zero economic profit due to free entry and exit, as new firms enter the market with similar or better products, reducing the demand for the existing firm's product. Therefore, the firm in monopolistic competition produces less than the quantity at minimum ATC in the long run.

In the Long Run,the Firm in Monopolistic Competition