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Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050

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BuyFindarrow_forward

Principles of Microeconomics

7th Edition
N. Gregory Mankiw
ISBN: 9781305156050
Textbook Problem

What is true of a monopolistically competitive market in long-run equilibrium?

a. Price is greater than marginal cost.

b. Price is equal to marginal revenue.

c. Firms make positive economic profits.

d. Firms produce at the minimum of average total cost.

To determine
Long run equilibrium in a monopolistic competition.

Explanation

Option (a)

In a monopolistic competition, price is greater than marginal cost as the firms always have some market power. Thus, option ‘a’ is correct.

Option (b)

In a monopolistic competition, downward sloping demand curve means marginal revenue is less than price. Therefore, option ‘b’ is incorrect...

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