In the long run, a profit-maximizing monopolistically competitive firm sets it price

A) above marginal cost.
B) below marginal cost.
C) equal to marginal revenue.
D) equal to marginal cost.

Question

In the long run, a profit-maximizing monopolistically competitive firm sets it priceA) above marginal cost.B) below marginal cost.C) equal to marginal revenue.D) equal to marginal cost.

Rachelle Ramos · Accepted Answer

Final Answer : A, Explanation :  In the long run, a profit-maximizing monopolistically competitive firm will set its price above marginal cost. This is because firms in monopolistic competition have some degree of market power, allowing them to charge a price that exceeds marginal cost, unlike in perfect competition where price equals marginal cost.

In the long run, a profit-maximizing monopolistically competitive firm sets it price

A) above marginal cost.
B) below marginal cost.
C) equal to marginal revenue.
D) equal to marginal cost.

Definitions

Learning Objectives

Learning Objectives

Related questions