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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

New firms will enter a monopolistically competitive market if

Marginal revenue is greater than marginal cost

Marginal revenue is greater than average total cost

Price is greater than marginal cost

Price is greater than 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.

Recall that in the long run, firms in a monopolistically competitive market will earn zero economic profit due to the entry of new firms.

Identify the condition for new firms to enter the market: New firms will enter if existing firms are making economic profits.

Economic profit occurs when total revenue is greater than total cost. In terms of per-unit measures, this means that the price (P) must be greater than the average total cost (ATC).

Therefore, the correct condition for new firm entry is when the price is greater than the average total cost (P > ATC), indicating that existing firms are earning positive economic profits.