Which of the following is correct?

Question

Quizplus · Accepted Answer

In the long run, a firm in monopolistic competition maximizes its profit at a point where price is equal to average total cost but the average total cost is not minimized. This is because the firm has some degree of market power due to product differentiation, which allows it to charge a price slightly above its marginal cost. However, the firm still faces competition from other firms in the industry, so it cannot charge a price that exceeds its average total cost. As a result, the firm operates with some excess capacity, which means that it could produce more output at a lower average total cost but chooses not to in order to maintain its market power.

Which of the Following Is Correct