Compared with a monopoly, 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 market, firms have some degree of market power, unlike in perfect competition. However, due to the free entry and exit of firms in the long run, economic profits are driven to zero, similar to perfect competition. This results in lower prices and greater output compared to a monopoly, where a single firm controls the market and can restrict output and raise prices to maximize profits.

Compared with a Monopoly, Long-Run Equilibrium in a Monopolistically Competitive