Which of the following is true about a monopolistically competitive firm in the long run?
A)It is as efficient as a purely competitive firm.
B)It tends to realize only a normal profit.
C)It produces at the level where costs are minimized.

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms tend to realize only a normal profit because there are no barriers to entry, allowing for other firms to enter the market and compete away any economic profits. However, the firm will not produce at the level where costs are minimized because it has some degree of market power and is able to charge a price above its marginal cost. It is also not as efficient as a purely competitive firm because it does not produce at the level of minimum average total cost.

Which of the Following Is True About a Monopolistically Competitive