In the long run, a monopolistically competitive firm operates _____.

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In the long run, a monopolistically competitive firm operates on the declining portion of its average total cost curve, as it seeks to minimize its average total cost and maximize its profits. The firm achieves this by differentiating its product and creating a perception of uniqueness or brand loyalty among consumers, enabling it to charge a higher price than its competitors. However, this strategy also incurs higher fixed costs, leading to higher average total costs. As the firm expands its output and captures more market share, it benefits from economies of scale and spreads its fixed costs over a larger output, resulting in a lower average total cost. Eventually, the firm settles at the point where its marginal revenue equals its marginal cost, which occurs on the declining portion of its average total cost curve.

In the Long Run, a Monopolistically Competitive Firm Operates _____