In the long run, the output of a monopolistically competitive firm will be:

Question

Quizplus · Accepted Answer

Monopolistically competitive firms operate at a point where marginal revenue equals marginal cost, but because they have some market power, they charge a price higher than the marginal cost. As a result, they produce at a smaller scale than the efficient scale, leading to excess capacity. In the long run, firms in monopolistic competition will have zero economic profit, but they will still produce at a scale smaller than the efficient scale. Therefore, the output of a monopolistically competitive firm will be less than the efficient scale at zero economic profit.

In the Long Run, the Output of a Monopolistically Competitive