Answer to Question #240834 in Microeconomics for Kriti Baral

Question

In the long run scenario why is a perfectly competitive market considered to be more

efficient than a monopolistic competition market when firms in both the markets make

normal profits in the long run? Use graphical illustrations to explain your answer.

Answer 1

In the long run in perfectly competitive market is efficient because of free entry and exit in the market. The price in the market is equal to the minimum of the long-run average cost curve.