-The above figure shows a motel engaged in monopolistic competition with other motels. The figure above shows the ________ equilibrium in which the motel is ________.
A) short-run; making an economic profit
B) long-run; making zero economic profit
C) short-run; incurring an economic loss
D) long-run; making an economic profit
E) short-run; making zero economic profit

Question

-The above figure shows a motel engaged in monopolistic competition with other motels. The figure above shows the ________ equilibrium in which the motel is ________.
A) short-run; making an economic profit 
B) long-run; making zero economic profit 
C) short-run; incurring an economic loss 
D) long-run; making an economic profit 
E) short-run; making zero economic profit

Quizplus · Accepted Answer

In the short-run equilibrium under monopolistic competition, firms can make economic profits due to product differentiation and brand loyalty. This allows them to set prices above average cost, leading to economic profits.

-The Above Figure Shows a Motel Engaged in Monopolistic Competition