When a profit-maximizing firm in a monopolistically competitive market charges a price higher than marginal cost,
A)the firm must be earning a positive economic profit.
B)the firm may be incurring economic losses
C)society benefits due to the firm's excess capacity.
D)new firms will enter the market in the long run.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms can charge a price higher than marginal cost due to product differentiation. However, this does not guarantee positive economic profit, as the firm may still incur losses if average total costs exceed the price.

When a Profit-Maximizing Firm in a Monopolistically Competitive Market Charges