A monopolistically competitive firm can increase its profits beyond the long-run equilibrium break-even level by deliberately lowering its price to force some of its competitors out of the market.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have differentiated products and face downward-sloping demand curves. Lowering prices to force competitors out is more characteristic of oligopolies, and in the long run, new firms can enter the market, restoring the break-even level.

A Monopolistically Competitive Firm Can Increase Its Profits Beyond the Long-Run