In monopolistically competitive markets in long run equilibrium:
A) more than the efficient level of output will be produced because price exceeds marginal cost.
B) less than the efficient level of output will be produced because price exceeds marginal cost.
C) more than the efficient level of output will be produced because marginal revenue exceeds marginal cost.
D) less than the efficient level of output will be produced because marginal revenue exceeds marginal cost.

Question

Quizplus · Accepted Answer

In monopolistically competitive markets in long run equilibrium, firms are producing at a point where price exceeds marginal cost, but not at the point where marginal revenue equals marginal cost. This leads to less than efficient level of output being produced. Therefore, option B is correct. Option A and C are incorrect because there is no guarantee that the price will exceed marginal cost or that marginal revenue will exceed marginal cost to the extent that leads to more than efficient level of output being produced. Option D is incorrect because it is inconsistent with the fact that firms are making a profit in long run equilibrium.

In Monopolistically Competitive Markets in Long Run Equilibrium