Refer to the graph shown of a monopolistically competitive firm. You can conclud

Question

Refer to the graph shown of a monopolistically competitive firm. You can conclude that:

new firms will enter the industry in the long run. existing firms will exit the industry in the long run. the industry is in long-run equilibrium. the price of ladies' dresses is equal to the minimum possible average total cost.

Refer to the graph shown of a monopolistically competitive firm. You can conclude that: new firms will enter the industry in the long run. existing firms will exit the industry in the long run. the industry is in long-run equilibrium. the price of ladies' dresses is equal to the minimum possible average total cost.

Explanation / Answer

Soln:

Ans : the price of ladies' dresses is equal to the minimum possible average total cost.

Explanation : From the figure we see that the price is equal to the long run average cost and the firm is in equilibrium and economic profits are eliminated in the long run, which is the only equilibrium consistent with the assumption of low barriers to entry.

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