If Dixie's Dry Cleaners competes in a monopolistically competitive market and if the firm is earning a normal profit, then
A) P = MC.
B) P = MR.
C) P

Question

If Dixie's Dry Cleaners competes in a monopolistically competitive market and if the firm is earning a normal profit, then
A) P = MC.
B) P = MR.
C) P < MR.
D) P = ATC.

Quizplus · Accepted Answer

In a monopolistically competitive market, when a firm is earning a normal profit, it means that price (P) equals average total cost (ATC). This is the point where the firm covers all its costs, including a normal profit, but does not earn economic profits.

If Dixie's Dry Cleaners Competes in a Monopolistically Competitive Market