With regard to the long-run equilibrium in the two market structures,the higher unit costs in monopolistic competition relative to perfect competition implies that

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In monopolistic competition, firms differentiate their products to create a perceived uniqueness and gain market power, but this creates higher unit costs compared to perfect competition. In the long-run equilibrium, firms in both market structures will produce where marginal cost equals marginal revenue. However, in monopolistic competition, firms will not be producing at the minimum of their average cost curve, unlike in perfect competition. This implies that there is a tradeoff between product variety and the ability to minimize cost per unit. Firms in monopolistic competition are willing to sacrifice some efficiency in exchange for product differentiation to create market power. Therefore, the best choice is C.

With Regard to the Long-Run Equilibrium in the Two Market