Table of contents

0. Basic Principles of Economics1h 5m
1. Reading and Understanding Graphs59m
2. Introductory Economic Models1h 10m
3. The Market Forces of Supply and Demand2h 26m
4. Elasticity2h 26m
5. Consumer and Producer Surplus; Price Ceilings and Floors3h 45m
6. Introduction to Taxes and Subsidies1h 46m
7. Externalities1h 12m
8. The Types of Goods1h 13m
9. International Trade1h 16m
10. The Costs of Production2h 35m
11. Perfect Competition2h 23m
12. Monopoly2h 13m
13. Monopolistic Competition1h 9m
14. Oligopoly1h 26m
15. Markets for the Factors of Production1h 26m
16. Income Inequality and Poverty35m
17. Asymmetric Information, Voting, and Public Choice39m
18. Consumer Choice and Behavioral Economics1h 16m

13. Monopolistic Competition

Monopolistic Competition in the Long Run

Microeconomics

13. Monopolistic Competition

Monopolistic Competition in the Long Run

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Multiple Choice

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

Price is greater than marginal cost

Price is equal to marginal revenue

Firms make positive economic profits

Firms produce at the minimum of average total cost

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Verified step by step guidance

Understand the characteristics of a monopolistically competitive market: Many firms, differentiated products, and free entry and exit in the long run.

In long-run equilibrium, firms in monopolistic competition will adjust their output such that they earn zero economic profits due to the entry of new firms attracted by any initial profits.

Recognize that in monopolistic competition, firms have some market power, allowing them to set prices above marginal cost. This is due to product differentiation, which gives firms some control over their pricing.

Analyze the relationship between price and marginal revenue: In monopolistic competition, the demand curve is downward sloping, meaning marginal revenue is less than price.

Consider the production level: Firms do not produce at the minimum of average total cost in long-run equilibrium because they face a downward-sloping demand curve, leading to excess capacity.