Figure 12.1.1
-A monopolistically competitive firm in long-run equilibrium:
A) will make negative profit.
B) will make zero profit.
C) will make positive profit.
D) Any of the above are possible.

Question

Figure 12.1.1
-A monopolistically competitive firm in long-run equilibrium:
A) will make negative profit. 
B) will make zero profit. 
C) will make positive profit. 
D) Any of the above are possible.

Quizplus · Accepted Answer

In long-run equilibrium, a monopolistically competitive firm will produce at the point where marginal cost equals marginal revenue, which is less than the price. Therefore, the firm will make zero economic profit, but will still charge a price higher than the perfectly competitive price due to product differentiation.

Figure 12.1.1 -A Monopolistically Competitive Firm in Long-Run Equilibrium