Compared with a perfectly competitive firm facing the same costs, long-run equilibrium for a monopolistically competitive firm will result in

Question

Quizplus · Accepted Answer

In the long-run equilibrium for a monopolistically competitive firm, the price will be higher than under perfect competition because they have some market power to charge a premium for their slightly differentiated product. However, the output level will be less than under perfect competition because firms are not producing at minimum average total cost, and therefore are not operating at maximum efficiency. Therefore, the correct answer is C: a higher price and less output.

Compared with a Perfectly Competitive Firm Facing the Same Costs