Question

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a perfectly competitive...

Long-run equilibrium in a monopolistically competitive market is similar to long-run equilibrium in a
perfectly competitive market in that in both markets, firms

produce where price equals marginal cost.

produce at the minimum point of their average total cost curves.

break even.

produce where price equals marginal revenue.

Homework Answers

Answer #1

Option 3

break even

Both markets have free entry and exit, so the long run profit is zero because in short run there is profit/loss then the in long run firm will enter/exit the market up to the profit is zero. But the both produces different quantity because monopolistic competition has differentiated product so the demand curve is downward sloping and the perfect competition has the identical product, so the demand curve is horizontal so the output and pricing are different but the firms earn zero profit in the long run.

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