Which of the following is not true of a monopolistically competitive firm?
A) The firm will maximize profits by producing where MR = MC.
B) The firm will not likely earn an economic profit in the long run.
C) The firm will shut down if price is less than average variable cost.
D) The firm will produce an efficient quantity where average total cost is minimized.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms will not produce at the efficient quantity where average total cost is minimized because they have some degree of monopoly power and can charge a price higher than the marginal cost. This leads to a higher price and lower quantity of output than the efficient level.

Which of the Following Is Not True of a Monopolistically