In the long run, monopolistic competitive firms will end up producing at a price equal to that of competitive markets.

Question

Quizplus · Accepted Answer

Monopolistic competitive firms have some market power to set their prices higher than their marginal cost in the short run, but in the long run, firms will enter the market and increase competition, driving down the price to equal the marginal cost. However, this price will still be higher than the perfectly competitive price in the long run, since monopolistic competition still allows for some differentiation and variety among products.

In the Long Run, Monopolistic Competitive Firms Will End Up