Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run.As a result,there is:
A)irrational capacity.
B)excess capacity.
C)product differentiation.
D)zero economic profit.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms produce less than the output at which average total cost is minimized in the long run due to product differentiation, which creates a downward sloping demand curve. This results in excess capacity, where firms operate below their full efficiency level, leading to higher average total cost than necessary.

Monopolistically Competitive Firms Produce Less Than the Output at Which