In a long-run equilibrium,firms in a monopolistically competitive industry sell at a price:
A)equal to marginal cost.
B)less than marginal cost.
C)greater than marginal cost.
D)less than marginal revenue.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive industry, firms produce at a point where marginal revenue (MR) equals marginal cost (MC). However, the price charged by firms is greater than MC because they have some degree of market power due to differentiation of their product. Therefore, choice C is correct as firms sell at a price higher than MC. Choices A and D can be eliminated as the firm does not necessarily sell at MC or less than MR in the long-run equilibrium.

In a Long-Run Equilibrium,firms in a Monopolistically Competitive Industry Sell