Long-run equilibrium under monopolistic competition is similar to long-run equilibrium under perfect competition in that:

Question

Quizplus · Accepted Answer

In both long-run equilibrium under monopolistic competition and perfect competition, price equals the average cost. This is because, in the long run, firms in both types of markets must produce at the minimum efficient scale, where average total cost is minimized. In perfect competition, this leads to a zero economic profit, while in monopolistic competition, firms have some market power and may earn positive economic profit. However, in both cases, the long-run equilibrium price equals the average cost.

Long-Run Equilibrium Under Monopolistic Competition Is Similar to Long-Run Equilibrium