These are the cost and revenue curves associated with a monopolistically competitive firm in the short run. According to the graph shown,in the long run we can expect that

Question

These are the cost and revenue curves associated with a monopolistically competitive firm in the short run.  According to the graph shown,in the long run we can expect that

Quizplus · Accepted Answer

In the long run, firms will enter the market because the price is above the average total cost, indicating that there are economic profits to be made. As new firms enter the market, the demand for each individual firm will decrease, causing a decrease in price and eventually driving economic profits to zero. This process will continue until the remaining firms in the market are making only normal profits. Therefore, the long run outcome for a monopolistically competitive firm is that it will operate at the point where price equals average total cost and will earn only normal profits.

These Are the Cost and Revenue Curves Associated with a Monopolistically