When a Monopolistically Competitive Firm Is in Long-Run Equilibrium

question 85

Multiple Choice

When a monopolistically competitive firm is in long-run equilibrium,

• A) production takes place where ATC is minimized.
• B) marginal revenue equals marginal cost and price equals average total cost.
• C) normal profit is zero and price equals marginal cost.
• D) economic profit is zero and price equals marginal cost.

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Definitions:

Variable Costs

Costs that change in proportion to the level of goods or services produced by a business.

Net Income

The total profit of a company after all expenses, including taxes and operating costs, have been subtracted from total revenues.

Variable Production Cost

Costs that fluctuate with the production volume, including variable manufacturing overhead, direct materials, and direct labor.

Fixed Production Cost

Costs that do not vary with the level of output, such as salaries, rent, and depreciation of production facilities.