In a long run, freedom of entry into a market forces a ______ to charge a price equal to average total cost, but average total cost exceeds its minimum level.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms have freedom of entry, which in the long run leads to a situation where firms charge a price equal to average total cost. However, due to product differentiation and the variety of products offered, average total costs are higher than the minimum possible, as firms do not produce at the most efficient scale.

In a Long Run, Freedom of Entry into a Market