One prediction about monopolistic competition is that firms:
A) operate at minimum average total cost in the long run.
B) will not engage in brand advertising.
C) will be inefficient in the long run.
D) must make economic profits in the short run.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by product differentiation, which allows firms to have some degree of market power, but not enough to be considered a monopoly. In the long run, firms will enter the industry and compete away economic profits. However, due to product differentiation and brand advertising, firms may not necessarily operate at minimum average total cost and may be relatively inefficient compared to perfectly competitive firms.

One Prediction About Monopolistic Competition Is That Firms