In long-run equilibrium for a monopolistically competitive firm, economic profit equals zero and thus the outcome is efficient.

Question

Quizplus · Accepted Answer

In long-run equilibrium for a monopolistically competitive firm, economic profit does equal zero due to free entry and exit in the market. However, the outcome is not efficient because the firm produces at a point where price exceeds marginal cost, leading to excess capacity and a failure to achieve allocative efficiency.

In Long-Run Equilibrium for a Monopolistically Competitive Firm, Economic Profit