All of the following statements,except one,are correct about a firm operating under conditions of either monopolistic competition or oligopoly.Which is the exception?

Question

Quizplus · Accepted Answer

In monopolistic competition or oligopoly, a firm charges a price above marginal cost in both the short run and the long run to maximize its profits. It faces a downward-sloping demand curve due to product differentiation, which means that it has some market power to raise the price. However, it does not charge a price equal to average cost in either the short run or the long run. This is because in the short run, it may operate at a loss, and in the long run, it may have excess capacity that increases its average cost. Therefore, it fails to achieve productive efficiency, which is the lowest possible average cost.

All of the Following Statements,except One,are Correct About a Firm