Question

    In monopolistic competition, firms in the long run :  

    A Earn supernormal profits Correct Answer Incorrect Answer
    B Produce at the minimum point of their average total cost curve Correct Answer Incorrect Answer
    C Face perfectly elastic demand Correct Answer Incorrect Answer
    D Earn normal profits and have excess capacity Correct Answer Incorrect Answer

    Solution

    Explanation: In the long run, free entry erodes supernormal profits, and firms do not produce at the minimum ATC due to product differentiation—leading to excess capacity .

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