Monopolistically competitive firms are unlikely to:
A. produce where price equals average total cost.
B. charge a higher price than firms in perfect competition.
C. produce a smaller quantity than firms in perfect competition.
<u>D. operate where price equals marginal cost.</u>
E. exit the industry when demand falls below long-run average costs.
The Correct answer is <u><em>OPTION D</em></u><em>.</em>
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When several firms provide similar but not identical replacement goods or services, we have<em> </em>monopolistic competition.
An industry with low barriers to entry and little impact from any one company's actions is said to be monopolistically competitive. Companies separate themselves from one another in the market by using price and advertising strategies.
It is called monopolistic competition when multiple businesses sell nearly identical goods. In monopolistic competition, businesses use price and marketing tactics to set themselves apart from rivals. In monopolistic competition, there are few barriers to entry in the form of high start-up costs or other difficulties to new entrants.
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