A monopolistic competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.

Question

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In the long run, a monopolistic competitive firm will not set price equal to minimum point on the long-run average cost curve. Instead, they will produce at the point where marginal revenue equals marginal cost, which will be lower than the minimum point on the long-run average cost curve. This is because they have some market power and can charge a price higher than their marginal cost, but still lower than what a monopolist would charge.

A Monopolistic Competitive Firm in the Long Run Sets Price