In the long run, a monopolistically competitive firm charges a higher price than a perfectly competitive firm. The reason for this difference is that monopolistically competitive firms
A) act like monopolies and restrict output.
B) have higher costs associated with advertising and product development.
C) need to earn economic profits in the long run to justify their expenditures on product development.
D) are able to price discriminate.

Question

Quizplus · Accepted Answer

Monopolistically competitive firms often incur additional costs due to advertising and product development to differentiate their products from those of competitors, leading to higher prices compared to perfectly competitive firms, which sell homogeneous products and do not have such costs.

In the Long Run, a Monopolistically Competitive Firm Charges a Higher