In long-run equilibrium in a monopolistically competitive industry: A) P = minimum AC. B) P minimum AC. C) P = MC. D) P

Question

In long-run equilibrium in a monopolistically competitive industry:
A) P = minimum AC.
B) P > minimum AC.
C) P = MC.
D) P < MC.

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive industry, firms will produce at a point where P > minimum AC. This is because firms in this market structure have some degree of market power, allowing them to charge a markup above their marginal cost. However, they still face some competition from other firms producing similar products, which prevents them from charging a price that is too high. As a result, they will produce a quantity where their average cost is minimized but still charge a price that is higher than their minimum average cost.

In Long-Run Equilibrium in a Monopolistically Competitive Industry