For a monopolistically competitive firm in long run equilibrium:
A) marginal revenue equals marginal cost and price equals average cost.
B) the economic profits it is earning will soon be competed away by entry.
C) accounting profits are zero and price equals marginal cost.
D) marginal revenue equals marginal cost and average total cost is minimized.

Question

Quizplus · Accepted Answer

In long run equilibrium, a monopolistically competitive firm sets marginal revenue equal to marginal cost, and price equals average cost, resulting in zero economic profit.

For a Monopolistically Competitive Firm in Long Run Equilibrium