In the long run, a monopolistically competitive firm acting according to the Chamberlin model
A)Will operate at the minimum point of the average cost curve
B)Will not operate at the minimum point of the average cost curve
C)Will earn positive economic profits
D)Will operate at the minimum point of the marginal cost curve

Question

Quizplus · Accepted Answer

In the Chamberlin model, firms in monopolistic competition differentiate their products in some way to create a perceived difference in quality or features that allows them to charge a higher price and operate with a degree of market power. This means that they will not operate at the minimum point of the average cost curve, as they are not producing at the efficient scale. However, as they are not true monopolies, they will not earn positive economic profits in the long run as new firms can enter the market and compete away any excess profits. They will operate at the minimum point of the marginal cost curve in the short run, but in the long run, they will produce where price equals average total cost, which is above the minimum point of the average cost curve.

In the Long Run, a Monopolistically Competitive Firm Acting According