What happens when a profit-maximizing firm in a monopolistically competitive market is in long run equilibrium?
When a profit-maximizing firm in a monopolistically competitive market is producing the long-run equilibrium quantity, it will be earning positive economic profits. d. its demand curve will be tangent to its average-total-cost curve.
How is profit maximized in monopolistic competition?
In a monopolistic market, a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce.
What profit will a monopolistically competitive firm make in the long run?
zero economic profit
Companies in a monopolistic competition make economic profits in the short run, but in the long run, they make zero economic profit. The latter is also a result of the freedom of entry and exit in the industry.
What happens when a profit-maximizing firm in a monopolistically competitive market is in long run equilibrium quizlet?
When a profit-maximizing firm in a monopolistically competitive market is in long-run equilibrium, price exceeds marginal cost.
Can a monopolistic competitive firm earn long run profit?
At this point, the firm ‘s economic profits are zero, and there is no longer any incentive for new firms to enter the market. Thus, in the long‐run, the competition brought about by the entry of new firms will cause each firm in a monopolistically competitive market to earn normal profits , just like a perfectly competitive firm .
What is true about a monopolistically competitive industry?
Monopolistic competition occurs when an industry has many firms offering products that are similar but not identical.
What are competitive elements of monopolistic competition?
Monopolistic competition is a market structure defined by four main characteristics: large numbers of buyers and sellers; perfect information; low entry and exit barriers; similar but differentiated goods. This last one is key to distinguish monopolistic competition from perfect competition since in the latter all products are homogenous.
Who are monopolistic competitors?
Monopolistic competition creates diversity and choice for the consumer within markets. It’s close to perfect. With low barriers to entry and exit, many companies compete in this market structure. Some examples of monopolistic competition include coffee shops, dry cleaners, and gas stations.