Answer:
Option (D) is correct.
Explanation:
In a monopolistically competitive industry, there are many firms which are selling similar products but products are not perfect substitutes. They generally have no control over the market price of the commodity.
Monopolistic competitive firms facing a downward sloping demand curve. Each of firm in this market condition is having a normal profit in the long run and no firm can earn economic profit.
These firms operate with a excess capacity because of the occurrence of zero profit tangency equilibrium. That's why the firms in this market are generally having the capability to produce larger amount of output at a lower average cost than the firm's current production level.
