If a monopolistically competitive firm is producing 500 units of output and at this output level, the price is $2 and the average total cost is $2, the firm profit/loss is equal to _______ and it _______ possible for the firm to be in long- run equilibrium.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, if the price equals the average total cost, the firm is making zero economic profit. This condition is possible in long-run equilibrium, where firms earn normal profit but no economic profit.

If a Monopolistically Competitive Firm Is Producing 500 Units of Output