A profit‐maximizing firm in a monopolistically competitive market structure behaves much like a ________ in the short run.

Question

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In the short run, a monopolistically competitive firm has some degree of market power, similar to a monopolistic firm, allowing it to set prices above marginal cost. Unlike perfectly competitive firms, which are price takers, or dominant and Cournot duopolist firms, which involve strategic interactions with other firms, a monopolistically competitive firm faces a downward-sloping demand curve and can make positive economic profits by setting its price.

A Profit‐maximizing Firm in a Monopolistically Competitive Market Structure Behaves