In the long run the monopolistic competitor always charges a price that is

Question

Quizplus · Accepted Answer

Monopolistic competition implies that the firm has some degree of market power, which allows it to charge a price above its marginal cost. However, the firm also faces some competition from other firms producing similar products, which limits its ability to raise price too high. In the long run, economic profits will attract new firms to the market, increasing competition and reducing the demand for each existing firm's product. This will push down the price and reduce economic profits to zero. At this point, the firm will be producing at its minimum point on the ATC curve, but charging a price that is above it in order to earn normal profits. Therefore, the answer is C, above the minimum point of its ATC curve.

In the Long Run the Monopolistic Competitor Always Charges a Price