Exhibit 9-3 A monopolistic competitive firm in the long run

As presented in Exhibit 9-3, the long-run profit-maximizing output for the monopolistic competitive firm is:

Question

Exhibit 9-3 A monopolistic competitive firm in the long run

As presented in Exhibit 9-3, the long-run profit-maximizing output for the monopolistic competitive firm is:

Quizplus · Accepted Answer

In the long run, a monopolistic competitive firm will produce where marginal revenue equals marginal cost and charge a price that yields normal profit (i.e. where price equals average total cost). In Exhibit 9-3, this occurs at an output level of 400 units per week. At this output level, the price is $10 and the average total cost is also $10, resulting in zero economic profit. Therefore, the long-run profit-maximizing output for the monopolistic competitive firm is 400 units per week.

Exhibit 9-3 a Monopolistic Competitive Firm in the Long Run