Carmen's Café is a monopolistic competitor. If Carmen is currently producing at the output level where her average total cost is minimised and the café is earning economic profits, then in the long run output will

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Quizplus · Accepted Answer

In the long run, other firms will enter the market and compete with Carmen's Café, which will decrease demand for her product. As a result, Carmen's Café will have to decrease its output to maintain its market power, causing average total cost to increase. Therefore, output will decrease and average total cost will increase in the long run.

Carmen's Café Is a Monopolistic Competitor