Which of the following is not a characteristic of monopolistically competitive firms in the long run:

Question

Quizplus · Accepted Answer

Monopolistically competitive firms have a certain degree of market power and can charge a price above marginal cost in the short run. However, in the long run, due to low barriers to entry, new firms enter the market and compete away any profits, leading to zero economic profits. Therefore, option A is a characteristic of monopolistically competitive firms in the long run. Option B is also true because firms always try to maximize profits. Option C is true in the short run, but in the long run, firms will adjust their prices to the level of marginal cost. However, option D is not a characteristic of monopolistically competitive firms in the long run as there is still some degree of inefficiency due to the monopolistic competition.

Which of the Following Is Not a Characteristic of Monopolistically