Use the following for questions 40-42.
Exhibit: Profit Maximization for a Firm in Monopolistic Competition

-(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Before the innovation reduced the cost, the firm's maximum economic profit was:
A) $0.
B) $30.
C) $750.
D) $4,500.

Question

Use the following for questions 40-42.
Exhibit: Profit Maximization for a Firm in Monopolistic Competition
 
-(Exhibit: Profit Maximization for a Firm in Monopolistic Competition) Suppose that an innovation reduces a firm's fixed costs and reduces cost from ATC to ATC' Before the innovation reduced the cost, the firm's maximum economic profit was:
A) $0. 
B) $30. 
C) $750. 
D) $4,500.

Quizplus · Accepted Answer

In monopolistic competition, firms typically earn zero economic profit in the long run due to free entry and exit in the market.

Use the Following for Questions 40-42