Figure 13-1

-In Figure 13-1, for a monopolistically competitive firm, long-run equilibrium can occur only at the quantity indicated by which point?
A)A
B)B
C)C

Question

Figure 13-1
​ 
-In Figure 13-1, for a monopolistically competitive firm, long-run equilibrium can occur only at the quantity indicated by which point?
A)A 
B)B 
C)C

Quizplus · Accepted Answer

In monopolistic competition, in the long run, firms will continue to enter the market until economic profits become zero. This means that in the long run, price will be equal to average cost. This occurs at the quantity where the average cost curve is tangent to the demand curve, which is at point C in the graph. Points A, B, and D all have prices above the average cost curve, meaning the firm is making positive economic profits and there will be entry into the market, driving down prices and profits until equilibrium is reached at point C.

Figure 13-1 ​

Figure 13-1