In long run equilibrium, a monopolistic competitive firm's price will most likely be
A)equal to average total cost, but higher than marginal cost.
B)greater than both average total cost and marginal cost.
C)less than both average total cost and marginal cost.
D)equal to marginal cost, but higher than average total cost.

Question

Quizplus · Accepted Answer

In long run equilibrium, a monopolistic competitive firm will have its price equal to average total cost due to the entry and exit of firms in the market, ensuring zero economic profit. However, due to downward sloping demand, price will be higher than marginal cost.

In Long Run Equilibrium, a Monopolistic Competitive Firm's Price Will