In long-run equilibrium,a monopolistically competitive firm will produce _____

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms are able to adjust their output and price to maximize their profits. As more firms enter the market, the demand faced by each firm decreases, leading to a decrease in price and a decrease in profit. Firms will therefore produce at the minimum point of their long-run average cost curve (LAC), where they are producing at their most efficient level, while still having some market power to charge a price above their marginal cost. This is at the downward-sloping portion of the LAC curve, where the firm is producing at its minimum efficient scale. Therefore, the correct answer is (C), along the downward-sloping portion of its LAC.

In Long-Run Equilibrium,a Monopolistically Competitive Firm Will Produce _____