Which of the following is true in the long run under monopolistic competition?
A) P = MC.
B) P = AC.
C) P AC MC.
D) Price AC = MC.
E) MR MC.

Question

Which of the following is true in the long run under monopolistic competition?
A) P = MC.
B) P = AC.
C) P > AC > MC.
D) Price > AC = MC.
E) MR > MC.

Quizplus · Accepted Answer

In the long run under monopolistic competition, firms make zero economic profit, which occurs when price (P) equals average cost (AC). This is because firms can enter and exit the market freely, leading to a situation where price adjusts to cover all costs, including normal profit, but not enough to sustain economic profits.

Which of the Following Is True in the Long Run