Consider a monopolistically competitive firm in a market in long-run equilibrium. This firm is likely earning
A)a positive economic profit since it is charging a price above marginal cost.
B)no economic profit since it is charging a price equal to its marginal cost.
C)a positive economic profit since it is charging a price above its average total cost.
D)no economic profit since it is charging a price equal to it average total cost.

Question

Quizplus · Accepted Answer

In long-run equilibrium of a monopolistically competitive market, firms are earning only normal profit, which means they are covering all their costs including opportunity cost of resources. This implies that firms are charging a price equal to their average total cost, which makes the answer D the correct one.

Consider a Monopolistically Competitive Firm in a Market in Long-Run