Question: State whether you agree or disagree. Explain briefly.

1. In a monopolistically competitive industry, for long-run equilibrium the firm's demand curve must intersect the average total cost curve for economic profit to equal zero.
2. Product differentiation increases the elasticity of demand facing a monopolistically competitive firm
3. When markets are contestable, even large oligopolistic firms tend to behave like perfectly competitive firms. As a result of competition, prices tend to be equal to long run average cost and economic profits disappear.

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