Question

In monopolistically competitive markets, resources are: Group of answer choices overallocated because long-run equilibrium occurs where price exceeds marginal cost. underallocated because long-run equilibrium occurs where marginal cost exceeds price. overallocated because long-run equilibrium occurs where marginal cost exceeds price. underallocated because long-run equilibrium occurs where price exceeds marginal cost.

Answer 1

Answer: underallocated because long-run equilibrium occurs where price exceeds marginal cost.

Explanation:

Monopolistic competition occurs when there are many firms that are producing products that are differentiated. It should also be noted that one typical characteristics of a monopolistic competition is a large number of firms coupled with low entry barriers.

It should be noted that in monopolistically competitive markets, resources are underallocated because long-run equilibrium occurs where price exceeds marginal cost..