A firm can earn economic profits in the short run

Question

Quizplus · Accepted Answer

A firm can earn economic profits in the short run in all market structures - perfectly competitive, monopolistically competitive, or monopolistic. In a perfectly competitive market, economic profits are possible if the firm can sell its output at a price higher than its average total cost. In a monopolistically competitive market, a firm can earn economic profits if it can differentiate its product successfully and create a brand that is preferred by customers. In a monopolistic market, the firm can earn profits by setting a price above marginal cost, although the level of profit may depend on the degree of market power the firm has.

A Firm Can Earn Economic Profits in the Short Run