The entry and exit of firms in a monopolistically competitive market guarantee that
A) marginal revenue equals marginal cost, and average total cost is minimised.
B) firms can earn economic profits in the long run.
C) price equals average total cost in the long run.
D) firms can earn economic profits in the short run.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, the entry and exit of firms ensure that in the long run, firms earn zero economic profit, meaning price equals average total cost.

The Entry and Exit of Firms in a Monopolistically Competitive