In the long run,a monopolistically competitive firm will

Question

Quizplus · Accepted Answer

In monopolistic competition, firms differentiate their products to create a degree of market power. As a result, they can charge a price higher than the minimum of their average costs in the short run, allowing them to earn positive economic profits. However, in the long run, other firms may enter the market, driving down demand for the original firm's product and reducing their ability to charge a higher price. As a result, the firm will produce where price equals the minimum of its average costs, but this price will still be higher than the firm's marginal cost, allowing it to earn a normal rate of return but not positive economic profits. This occurs at the point where price equals the minimum of average costs, which is typically where the firm produces. Therefore, the best choice is D.

In the Long Run,a Monopolistically Competitive Firm Will