Which of the following is not true of a monopolistically competitive firm in long run equilibrium?
A)Price exceeds marginal cost
B)The average total cost curve lies above the demand curve
C)Marginal revenue equals marginal cost
D)The price elasticity of demand is zero

Question

Quizplus · Accepted Answer

In long run equilibrium, monopolistically competitive firms still have some degree of competition and therefore must consider the price elasticity of demand. If the price elasticity of demand were zero, it would mean that the firm could raise its price without any decrease in quantity demanded, which is not realistic in a monopolistically competitive market. Therefore, choice D is not true.

Which of the Following Is Not True of a Monopolistically