Suppose a monopolistically competitive firm is in long-run equilibrium.The firm's demand curve is tangent to its average cost curve at Q = 25.Average cost is minimized at Q = 35,where average cost is $50.Which of the following is true?

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms maximize profit where marginal revenue equals marginal cost, which typically occurs where the demand curve is tangent to the average cost curve. Since the demand curve is tangent to the average cost curve at Q = 25, this indicates the firm maximizes profit at an output level of 25 units.

Suppose a Monopolistically Competitive Firm Is in Long-Run Equilibrium