The long-run equilibrium for a monopolistically competitive firm is to the left of the low point on its average total cost curve.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive firm, firms face downward-sloping demand curves and have excess capacity. This means they do not produce at minimum average total cost, which would be the most efficient scale of production, hence operating to the left of the low point on their average total cost curve.

The Long-Run Equilibrium for a Monopolistically Competitive Firm Is to the Left