Which of the following conditions holds for a monopolistically competitive firm that is in equilibrium in the long run?
A)Price equal to marginal cost
B)Marginal cost equal to average cost
C)Price equal to average cost
D)Marginal cost equal to average revenue

Question

Quizplus · Accepted Answer

In the long run, under monopolistic competition, firms will adjust their production to reduce their costs, and in equilibrium, the firm's price will be equal to its average cost. At this point, the firm will not make any economic profit, but it will continue to produce because it is covering all its costs, including normal profit. Therefore, the correct answer is C: Price equal to average cost.

Which of the Following Conditions Holds for a Monopolistically Competitive