In the short run,a monopolistically competitive firm:
A)can earn only a normal profit.
B)will produce at the point where marginal revenue is greater than marginal cost,in order to maximize profits.
C)will produce at the point at which price equals minimum ATC to maximize profits.
D)will be able to enter another monopolistically competitive industry.
E)will shut down temporarily if price is less than AVC.

Question

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm will shut down temporarily if the price is less than the average variable cost (AVC), as it would not be able to cover its variable costs.

In the Short Run,a Monopolistically Competitive Firm