(Figure: Monopolistic Competition) Refer to the figure.Suppose the figure represents a firm that operates in amonopolistic competitive market. In the long run you wouldexpect price in this market to:

Question

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In the long run, in a monopolistic competition market, firms are free to enter or exit the market. As a result, if the current firms make economic profits, new firms will enter the market in search of profits, resulting in an increase in the supply of the product. This increase in supply will lead to a decrease in price until the price equals the minimum point on the average cost curve (P = AC). Therefore, in the long run, we would expect price to decrease to the point that P = AC in a monopolistic competition market.

(Figure: Monopolistic Competition) Refer to the Figure