In the long run,in the model of monopolistic competition,for a typical firm,price is
A)above average cost but equal to marginal cost.
B)above marginal cost but equal to average cost.
C)above marginal cost.
D)equal to marginal cost and equal to or greater than average cost.

Question

Quizplus · Accepted Answer

In the long run, in a model of monopolistic competition, firms face a downward-sloping demand curve, and they will adjust their output so that price equals average cost (P = AC) to eliminate economic profits, but due to product differentiation and market power, price will be above marginal cost (P > MC). This ensures that firms just break even in the long run.

In the Long Run,in the Model of Monopolistic Competition,for a Typical