In the long run, a monopolistically competitive firm

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In the long run, a monopolistically competitive firm will produce where P = ATC, meaning that it will earn zero economic profit. While the firm may earn economic profit in the short run, increased competition from other firms will eventually push down prices and reduce profits. The firm also may not achieve allocative efficiency since it may not produce where P = MC. Instead, it will produce where P = ATC, which may not be the socially optimal level of output.

In the Long Run, a Monopolistically Competitive Firm