A profit-maximizing, monopolistically competitive restaurant serves 60 burgers a day at a total cost of $180 and earns a total profit of $180.In the long run, everything else equal, the
A)restaurant will charge more than $6 per burger.
B)restaurant's average total cost will rise and its total revenue will fall.
C)restaurant will sell more burgers at a lower average profit per burger.
D)All of the responses are correct.

Question

Quizplus · Accepted Answer

In the long run, new firms will enter the market due to the existing firm's profit, increasing competition. This will likely lead to a decrease in the number of burgers sold by the original restaurant at its initial price, reducing its total revenue. Additionally, the average total cost may rise due to the need for increased spending on marketing or improvements to maintain competitiveness, leading to the outcomes described in option B.

A Profit-Maximizing, Monopolistically Competitive Restaurant Serves 60 Burgers a Day