In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes

Question

Quizplus · Accepted Answer

If the price is above average total cost in a monopolistically competitive market, the firm makes profits because the price is greater than the cost of production. This will attract new firms to enter the market, which will increase competition and eventually lead to the price falling. As new firms enter the market, the existing firms may experience a decrease in demand, but they will continue to make profits as long as the price remains above average total cost. Therefore, the correct choice is D.

In the Short Run, If the Price Is Above Average