Question

When a monopolistically competitive firm is in a long-run equilibrium, the values of average revenue, average total cost, and price are all the same.

Select one:

True

False

Answer 1

Answer True

In the long time period, monopolistically competitive firm is in a long-run equilibrium; the values of average revenue, average total cost, and price are all the same.

The reason is that in long run, due to exit and entry of firms, monopolistic competitive firm earn normal profit. At the time of normal profit Average revenue is equal to Average total cost. And average revenue is also considered price. Therefore, in the long time period, monopolistically competitive firm is in a long-run equilibrium, the values of average revenue, average total cost, and price are all the same.