Exhibit 10-2 A monopolistic competitive firm

As represented in Exhibit 10-2, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Question

Exhibit 10-2 A monopolistic competitive firm

As represented in Exhibit 10-2, the maximum long-run economic profit earned by this monopolistic competitive firm is:

Quizplus · Accepted Answer

In the long-run in monopolistic competition, firms are able to enter and exit the market freely, leading to a situation of zero economic profit. In the graph, the long-run equilibrium occurs at the point where the demand curve is tangent to the average total cost curve, indicating zero economic profit. Therefore, the maximum long-run economic profit earned by the firm is zero.

Exhibit 10-2 a Monopolistic Competitive Firm