In Figure 12.8, the demand curve facing a firm in a monopolistically competitive industry is shown as being tangent to its average cost curve at q€². Explain why this is a long-run equilibrium position for this firm. That is, why does marginal revenue equal marginal cost, and why are long-run profits zero?
Figure 12.8
Monopolistic Competition

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MC Price, costs mr d' AC mr P* q' q* min Quantity per week