The price in long-run equilibrium for a monopolistically competitive firm is _____ and output is _____, compared to that of a perfectly competitive firm with an identical production function and cost curves.
A) higher; higher
B) higher; smaller
C) lower; higher
D) lower; smaller

Question

Quizplus · Accepted Answer

In long-run equilibrium, a monopolistically competitive firm faces a downward-sloping demand curve, leading to a price higher than marginal cost and a smaller output compared to a perfectly competitive firm, which produces at the point where price equals marginal cost.

The Price in Long-Run Equilibrium for a Monopolistically Competitive Firm