Monopolistic competition in long-run equilibrium is characterized by
A)excess capacity.
B)higher cost per unit of output than under perfect competition.
C)inefficiency in use of resources.
D)All of the responses are correct.

Question

Quizplus · Accepted Answer

Monopolistic competition in long-run equilibrium is characterized by all of the given options: excess capacity, higher cost per unit of output than under perfect competition, and inefficiency in the use of resources. This is because firms in monopolistic competition face downward-sloping demand curves and have some degree of market power, which allows them to produce at levels where average total cost is not minimized, leading to excess capacity and inefficiency.

Monopolistic Competition in Long-Run Equilibrium Is Characterized by