In monopolistic competition, long-run equilibrium occurs where price is:

Firms have some market power P MC due to product differentiation but free entryexit drives economic profit to zero, so P ATC.

A Equal to marginal cost and average cost. Correct Answer Incorrect Answer

B Above marginal cost but equal to average cost. Correct Answer Incorrect Answer

C Equal to marginal cost but above average cost. Correct Answer Incorrect Answer

D Above both marginal and average cost. Correct Answer Incorrect Answer

E Below average cost. Correct Answer Incorrect Answer

Solution

Firms have some market power (P > MC due to product differentiation) but free entry/exit drives economic profit to zero, so P = ATC.

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