A monopolistically competitive firm maximizes profits in the short run and long run at an output level where marginal revenue equals marginal costs.

Question

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm will maximize profits at the output level where marginal revenue equals marginal cost. In the long run, the firm will continue to produce at this output level but may earn only normal profits due to entry of new firms into the market.

A Monopolistically Competitive Firm Maximizes Profits in the Short Run