Table 16-4
Beatrice's Birthday Cakes operates in a monopolistically competitive market, so it is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's.

-Refer to Table 16-4. Given the cost and revenue data, Beatrice's is

Question

Table 16-4
Beatrice's Birthday Cakes operates in a monopolistically competitive market, so it is one bakery among many in the market for birthday cakes. The following table presents cost and revenue data for birthday cakes at Beatrice's.
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-Refer to Table 16-4. Given the cost and revenue data, Beatrice's is

Quizplus · Accepted Answer

In a long-run equilibrium, firms in a perfectly competitive market earn zero economic profit, as any economic profit attracts new firms into the market, increasing supply and driving down prices until profits are eliminated. The statement that Beatrice's is not in a long-run equilibrium and more businesses will enter the bakery market suggests that Beatrice's is currently earning economic profits, which is not sustainable in the long run as new entrants will erode these profits.

Table 16-4 Beatrice's Birthday Cakes Operates in a Monopolistically Competitive Market, So