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Refer to Figure 12.1.1 above. Which of the figures describes the long run equilibrium in a monopolistically competitive market?
A) The figure in panel (a) .
B) The figure in panel (b) .
C) Both figures.
D) Neither figure.
Long Run Equilibrium
Long run equilibrium occurs when all inputs can be adjusted by firms, markets are perfectly competitive, and economic profit is zero, leading to a situation where firms just cover their opportunity costs.
Monopolistically Competitive
A market structure characterized by many sellers offering differentiated products, leading to competition based on product quality, brand, and price.
- Review the long-term equilibrium phase in monopolistic competition, specifically its impact on zero economic profits and inefficiencies.
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Learning Objectives
- Review the long-term equilibrium phase in monopolistic competition, specifically its impact on zero economic profits and inefficiencies.
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