A monopolistically competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.

Question

Quizplus · Accepted Answer

In the long run, a monopolistically competitive firm may not set price equal to the minimum point on the long-run average cost curve due to its ability to differentiate its products and create its own market niche. The firm may set a higher price and still maintain a certain level of demand due to product differentiation.

A Monopolistically Competitive Firm in the Long Run Sets Price