Question

Generally, the monopolistic competitor is in long run equilibrium when

Group of answer choices

MR = MC and P = ATC.

P = MC = ATC.

P = MC and P > ATC.

MR = MC = ATC.

b and d

Answer 1

MR = MC and P = ATC.

Explanation :

Monopolistically competitive firm produce where MR equals MC to maximise its profit . In long run, because of free entry and exit, monopolistically competitive firm earns zero economic profit. So price =ATC.

Monopolistically competitive firm produce differentiate product so, it has some some market power and thus face downward sloping demand curve and marginal revenue curve is below the demand curve. So they produce where MR equals MC and charge price on the demand curve above where MR equals MC.