The price in long-run equilibrium for a monopolistically competitive firm is _____ and the output is _____,compared with that of a perfectly competitive firm with an identical production function and cost curves.

Question

Quizplus · Accepted Answer

In the long-run, monopolistically competitive firms will produce at the point where marginal revenue equals marginal cost, which will imply a lower level of output and a higher price compared to a perfectly competitive firm. This is because the monopolistically competitive firm has some degree of market power, which allows them to charge a higher price for their differentiated product. Therefore, the correct answer is B, higher price and lower output.

The Price in Long-Run Equilibrium for a Monopolistically Competitive Firm