The long-run equilibrium position of a monopolistically competitive firm is where average costs are:
A) constant.
B) increasing.
C) decreasing.
D) at their minimum point.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive firm, the firm is making normal profits and there is no incentive for new firms to enter the market. At this point, the firm is producing at the minimum point of its average total costs (ATC) curve. This means that average costs are decreasing up to this point and start increasing beyond it. Therefore, the correct answer is C.

The Long-Run Equilibrium Position of a Monopolistically Competitive Firm Is