In the long run, a monopolistic competitor will produce to the point at which

Question

Quizplus · Accepted Answer

Monopolistic competitors do not have a perfectly elastic demand curve, meaning they have some market power and can charge a price higher than marginal cost. As a result, they will not produce at the lowest possible price or at the minimum of possible average total costs, as doing so would not maximize profits. Instead, they will produce where marginal revenue equals marginal cost, which is usually at a quantity lower than the one that minimizes average total costs. This will result in average total costs that are higher than the minimum of possible ATC.

In the Long Run, a Monopolistic Competitor Will Produce to the Point