In monopolistic competition, in the long run it is most likely that P = ATC and that there will be no excess capacity.

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In the long run, firms in monopolistic competition will continue to differentiate their products and incur some degree of excess capacity, leading to a situation where price (P) is greater than average total cost (ATC). This is due to the fact that firms in monopolistic competition have some level of market power to set prices above their marginal costs, but also face competition from other firms selling similar but not identical products. As a result, there is no strong pressure for them to produce at the minimum efficient scale, and they will continue to operate with some excess capacity.

In Monopolistic Competition, in the Long Run It Is Most