When a monopolistically competitive firm is in long-run equilibrium,

Question

Quizplus · Accepted Answer

In long-run equilibrium for a monopolistically competitive firm, it will produce where marginal revenue (MR) equals marginal cost (MC), which means that there will be no incentive to change the level of production. Additionally, the price will be equal to average total cost (ATC) in the long run since firms in monopolistic competition do not make economic profits in the long run due to free entry and exit. Finally, demand will also be equal to average total cost in the long run due to the absence of economic profits. Therefore, all of the above statements are correct.

When a Monopolistically Competitive Firm Is in Long-Run Equilibrium