Which of the following is a characteristic of the long-run equilibrium under monopolistic competition?
A. Price equals minimum average cost
B. Firms produce at the lowest point of the LAC curve
C. Firms earn supernormal profits
D. Firms earn only normal profits and operate with excess capacity
Answer: Option D
Solution (By JKSSB Mock Tests)
In the long run, free entry eliminates supernormal profits under monopolistic competition. Firms operate on the falling portion of their LAC curve, implying excess capacity.
Explanation:
India adopted a mixed economy framework where both public and private sectors coexist, with the government playing a regulatory and developmental role.
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