- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 1. The Firm and Market Structures
- Subject 7. Monopolistic Competition
CFA Practice Question
When a monopolistically competitive industry is in long-run equilibrium, ______
B. price equals minimum average total cost.
C. price equals marginal cost.
A. firms earn zero economic profits.
B. price equals minimum average total cost.
C. price equals marginal cost.
Correct Answer: A
Since there are no barriers to entry or exit, firms enter or exit monopolistically competitive markets until zero economic profits exist.
User Contributed Comments 2
| User | Comment |
|---|---|
| YOUCANDOIT | So in long run, price still = ATC but not necessarily at its minimum? |
| fanDango | Correct |