When economists say that monopolistic competition drives long-run profits to zero,it implies that the demand curve is ________ to the average total cost curve.

Question

Quizplus · Accepted Answer

In monopolistic competition, in the long run, firms make zero economic profit as the demand curve is tangent to the average total cost curve at the equilibrium output. This tangency point represents the point where price equals average total cost, allowing for normal profit but eliminating economic profit.

When Economists Say That Monopolistic Competition Drives Long-Run Profits to Zero,it