In the long run, if the demand curve of a profit-maximizing monopolistically competitive firm is tangent to its average total cost curve, then
A)the firm would break even.
B)the firm would shut down temporarily.
C)the firm would earn enough revenue to cover its variable costs, but not its fixed costs.
D)the firm would earn an economic profit.

Question

Quizplus · Accepted Answer

If the demand curve is tangent to the average total cost curve, the firm is producing at the minimum efficient scale and is earning a normal profit. This means that the firm is covering all of its costs, including its fixed costs, but is not earning any economic profit. Therefore, the firm would break even.

In the Long Run, If the Demand Curve of a Profit-Maximizing