-Fresh Taste, Inc. produces organic breakfast cereals. The market for breakfast cereals is monopolistically competitive. The figure above shows the demand curve that Fresh Taste faces (D) , the company's marginal revenue curve (MR) , its marginal cost curve (MC) , and its average total cost curve (ATC) . Fresh Taste's economic profit is

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms earn zero economic profit in the long run because they produce at the point where price equals average total cost (P = ATC). This scenario indicates that Fresh Taste is operating at a point where its price is equal to its average total cost, implying it is earning only a normal profit, which is an economic profit of zero.