Which of the following is TRUE about a firm in monopolistic competition in the long run?
A) P = MC
B) P = MR
C) ATC = MC
D) P = ATC
E) MC = ATC

Question

Quizplus · Accepted Answer

In the long run, a firm in monopolistic competition will produce where price equals average total cost (P=ATC). This is because in the long run, firms have the ability to adjust their production and attract new competitors. As new firms enter the market and produce similar products, the demand for each individual firm's product will decrease, causing them to lower their prices to maintain sales. As this happens, the firm will eventually reach a point where they are producing at the minimum efficient scale and their average total cost is minimized. At this point, price will equal average total cost (P=ATC).

Which of the Following Is TRUE About a Firm in Monopolistic