In long run equilibrium, the monopolistic competitor will most likely
A)be earning zero economic profit.
B)be operating at the lowest point on its average total cost curve.
C)charge a price that is equal to marginal revenue.
D)charge a price that is equal to marginal cost.
E)c and d

Question

Quizplus · Accepted Answer

In long-run equilibrium, a monopolistic competitor will earn zero economic profit due to the entry and exit of firms in the market. This is because new firms will enter the market if existing firms are making profits, driving those profits down to zero. Unlike perfect competition, monopolistic competitors do not operate at the minimum of the average total cost curve due to product differentiation and do not equate price to marginal cost or marginal revenue due to their downward-sloping demand curve.

In Long Run Equilibrium, the Monopolistic Competitor Will Most Likely