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Scenario: Monopolistically Competitive Firm
For a monopolistically competitive firm, Q = 160 - P; MC = 20 + 2Q; and TC = 20Q + Q 2 + 20.
-(Scenario: Monopolistically Competitive Firm) Given the information in the scenario Monopolistically Competitive Firm, in the long run, this firm can expect that:
A) its demand curve will become more elastic as it dominates the market more.
B) its economic profits will decrease to zero.
C) its losses will fall and eventually become a positive economic profit.
D) other firms will not enter or exit the industry.

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Quizplus · Accepted Answer

In the long run, monopolistically competitive firms experience zero economic profit due to the entry and exit of firms, which drives profits to normal levels.

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