In the long run, a firm under monopolistic competition operates where demand (AR) is tangent to the:
AMinimum point of the LRAC curve
BLong-Run Average Cost (LRAC) curve on its downward-sloping segment
CMarginal Cost curve at its peak
DTotal Cost curve at the origin
Explanation
Due to product differentiation and free entry, the demand curve is tangent to the downward-sloping section of LRAC, causing excess capacity.
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