In a monopolistically competitive industry with zero profits, each firm will produce less than the amount that minimizes average costs.

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In a monopolistically competitive industry with zero profits, each firm will produce at a level where marginal revenue equals marginal cost, which is less than the output level that minimizes average costs. This is because, in a monopolistically competitive market, firms face downward sloping demand curves, and in order to increase sales, they have to lower their prices, thereby reducing their profit margins. As a result, they produce less output than the level at which average costs are minimized, in order to avoid incurring losses.

In a Monopolistically Competitive Industry with Zero Profits, Each Firm