In long-run equilibrium, compared to a perfectly competitive market, a monopolistically competitive industry produces a ________ level of output and charges a ________ price.
A)higher; lower
B)lower; lower
C)lower; higher
D)higher; higher

Question

Quizplus · Accepted Answer

In the long-run equilibrium, monopolistically competitive industries produce a lower level of output compared to perfectly competitive markets due to the presence of product differentiation and brand loyalty. Additionally, they charge a higher price as a result of their pricing power stemming from a degree of market power. Therefore, the best choice is C, where monopolistically competitive industries produce a lower level of output and charge a higher price.

In Long-Run Equilibrium, Compared to a Perfectly Competitive Market, a Monopolistically