For a monopolistically competitive firm in long-run equilibrium:

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive firm, price will equal average total cost. This is because in the long run, firms in monopolistic competition are able to adjust their production levels and prices to achieve zero economic profits. As firms differentiate their products, they are able to charge a slightly higher price than the average total cost, but not high enough to deter entry of new firms. Therefore, in the long-run equilibrium, the firm will produce where price equals average total cost.

For a Monopolistically Competitive Firm in Long-Run Equilibrium