In long-run equilibrium in monopolistic competition:
A) price is greater than average total cost.
B) price is equal to average total cost at an output below where average total cost is minimized.
C) price is equal to average total cost at its minimum.
D) price is equal to average total cost at an output above where average total cost is minimized.

Question

Quizplus · Accepted Answer

In long-run equilibrium, firms in monopolistic competition produce where price equals average total cost, but not at the minimum of average total cost due to excess capacity.

In Long-Run Equilibrium in Monopolistic Competition