When a monopolistically competitive firm is in long-run equilibrium:
A) the demand curve will be perfectly elastic.
B) marginal cost must be falling.
C) price exceeds marginal cost.
D) marginal revenue exceeds marginal cost.

Question

Quizplus · Accepted Answer

In long-run equilibrium, a monopolistically competitive firm will produce where marginal revenue equals marginal cost. However, the price charged will be greater than the marginal cost due to the firm's market power and ability to differentiate its product from competitors. Therefore, choice (C) is the correct answer. Choices (A) and (B) are incorrect because they do not necessarily hold true in a monopolistically competitive market. Choice (D) is partially correct, as marginal revenue must be greater than or equal to marginal cost for the firm to be profitable, but it does not necessarily mean the firm is in long-run equilibrium.

When a Monopolistically Competitive Firm Is in Long-Run Equilibrium