In the long run, firms in a monopolistically competitive market operate at:

Question

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In a monopolistically competitive market, firms typically operate at a less-than-efficient scale because they have some degree of market power that allows them to set prices above marginal cost, but they also face competition that limits their market power. This results in excess capacity and less than optimal scale of operation compared to a perfectly competitive market where firms operate at an efficient scale.

In the Long Run, Firms in a Monopolistically Competitive Market