If a monopolistically competitive firm is in long-run equilibrium, then
A)ATC = MR.
B)AFC = MR.
C)P = ATC and P MC.
D)P = ATC and P = MC.
E)d = AR and AR = MR

Question

If a monopolistically competitive firm is in long-run equilibrium, then
A)ATC = MR.
B)AFC = MR.
C)P = ATC and P > MC.
D)P = ATC and P = MC.
E)d = AR and AR = MR

Quizplus · Accepted Answer

In long-run equilibrium, a monopolistically competitive firm will produce where P = ATC (where price equals average total cost) in order to maximize profits. Since ATC also equals MC (marginal cost) in the long run, the firm will also be producing where P = MC. However, since monopolistically competitive firms have some market power, price will be greater than marginal cost (P > MC). Therefore, the correct answer is C.

If a Monopolistically Competitive Firm Is in Long-Run Equilibrium, Then