Compared to a purely competitive firm in long-run equilibrium, the monopolistic competitor has a
A) lower price and lower output.
B) higher price and lower output.
C) higher price and higher output.
D) price and output that may be higher or lower.

Question

Quizplus · Accepted Answer

A monopolistic competitor has some degree of market power, allowing them to charge a higher price than a purely competitive firm. However, they also face competition from substitutes, which can limit their ability to raise prices too high. As a result, they tend to produce a lower output than a purely competitive firm, but at a higher price. Therefore, choice B is the correct answer.

Compared to a Purely Competitive Firm in Long-Run Equilibrium, the Monopolistic