Asked by Jackson Brown on Jun 10, 2024
Verified
Which of the following is not characteristic of long-run equilibrium under monopolistic competition?
A) Price equals minimum average total cost.
B) Marginal cost equals marginal revenue.
C) Price is equal to average total cost.
D) Price exceeds marginal cost.
Long-Run Equilibrium
A state in which all factors of production can be adjusted, markets clear, and no economic agents have the incentive to change their behavior.
Marginal Revenue
The additional income that a business receives from selling one more unit of a good or service.
- Identify the criteria for achieving long-run equilibrium in markets characterized by monopolistic competition.
Verified Answer
QA
Quentin AbramoJun 14, 2024
Final Answer :
A
Explanation :
In long-run equilibrium under monopolistic competition, firms face a downward-sloping demand curve, and they have excess capacity. This means that price equals average total cost (ATC) to ensure normal profit, not minimum average total cost. Choices B, C, and D are characteristics of monopolistic competition in the long run.
Learning Objectives
- Identify the criteria for achieving long-run equilibrium in markets characterized by monopolistic competition.
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