The monopolistic competitive firm in short-run equilibrium may experience economic profits that are

Question

Quizplus · Accepted Answer

In the short-run, a monopolistic competitive firm may experience economic profits greater than, equal to, or less than zero, depending on the demand for its differentiated product and the cost of production. If the firm's product is highly differentiated and in high demand, it may be able to charge a higher price and earn economic profits. However, if the demand for its product is low and/or its costs are high, it may experience losses. Thus, there is no guarantee that a monopolistic competitive firm will always make economic profits or incur losses in the short-run.

The Monopolistic Competitive Firm in Short-Run Equilibrium May Experience Economic