Compared with competition, long-run equilibrium in a monopolistically competitive industry results in
A)lower prices and greater output.
B)higher prices and lower output.
C)lower prices and lower output.
D)higher prices and greater output.
E)prices and output that can be higher or lower.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms have some market power, which allows them to charge higher prices than in perfect competition. Additionally, because there are many firms, each with differentiated products, they don't produce as much as they would in a perfectly competitive market, leading to lower output.

Compared with Competition, Long-Run Equilibrium in a Monopolistically Competitive Industry