Question

Which of the following is not true of monopolistic competition?

I. In the long run the demand curve will shift to the left until price equals average total cost and economics profit increases.
II. in the long run it does not operate at minimum average cost.
III. There are large number of buyers and sellers, it is a price maker, and there are low barriers of entry.

Answer 1

The statement that in the long run the demand curve will shift to the left until price equals average total cost and economic profit increases is not true.

Option: (I)

Step-by-step explanation:

• In monopolistic competition, the demand for the commodity that is manufactured often remains constant, or at instances, increases as the manufacturer is the only player producing the commodity in that particular segment, or of that particular brand, or of that particular quality.
• These manufacturers often sell their products at costs more than the marginal costs by taking advantage of the monopolistic competition in place.