Exhibit 10-3 A monopolistic competitive firm in the long run

As presented in Exhibit 10-3, the long-run profit-maximizing output for the monopolistic competitive firm is:

Question

Exhibit 10-3 A monopolistic competitive firm in the long run

As presented in Exhibit 10-3, the long-run profit-maximizing output for the monopolistic competitive firm is:

Quizplus · Accepted Answer

In the long run, a monopolistic competitive firm produces where marginal revenue equals marginal cost and charges a price that is higher than the marginal cost. In Exhibit 10-3, this occurs where the marginal cost curve intersects the demand curve at a quantity of 400 units per week. At this level of output, the firm earns a normal profit (i.e., zero economic profit) because the price is equal to the average total cost. Therefore, the long-run profit-maximizing output for this firm is 400 units per week.

Exhibit 10-3 a Monopolistic Competitive Firm in the Long Run