In the long run, economic theory predicts that a monopolistically competitive firm will
A) earn an economic profit.
B) realize all economies of scale.
C) equate price and marginal cost.
D) have excess production capacity.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms have some control over price due to product differentiation, but they also face competition from similar products. This means that they cannot fully pass on increased costs to consumers, and thus, they are unlikely to earn economic profits in the long run. Additionally, because they do not fully realize economies of scale like a monopoly would, they typically have excess production capacity.

In the Long Run, Economic Theory Predicts That a Monopolistically