All of the following are characteristics of long-run equilibrium for firms in a monopolistically competitive market except:
A)price equals marginal cost.
B)price equals average total cost.
C)marginal cost equals marginal revenue.
D)price exceeds the minimum of average total cost.

Question

Quizplus · Accepted Answer

In long-run equilibrium for firms in a monopolistically competitive market, price equals average total cost (B), ensuring zero economic profit, and marginal cost equals marginal revenue (C) as a condition for profit maximization. However, unlike in perfect competition, price does not equal marginal cost (A), as firms have some market power allowing them to set prices above marginal cost. Price exceeding the minimum of average total cost (D) is a characteristic of monopolistic competition due to product differentiation and not having the minimum efficient scale at the bottom of the ATC curve.

All of the Following Are Characteristics of Long-Run Equilibrium for Firms