In the long run, a firm in many differentiated sellers can be expected to:
A) leave the industry unless it is earning an economic profit.
B) produce at the point at which price is equal to average variable cost.
C) produce at the point at which price is equal to average total cost.
D) earn an economic profit.

Question

Quizplus · Accepted Answer

In the long run, firms in a monopolistically competitive market (many differentiated sellers) will produce where price equals average total cost, earning zero economic profit due to free entry and exit in the market.

In the Long Run, a Firm in Many Differentiated Sellers