Refer to the above graphs.Which graph would not be a possible depiction of short-run or long-run outcomes for a monopolistically competitive firm?
A) A
B) B
C) C
D) D

Question

Refer to the above graphs.Which graph would not be a possible depiction of short-run or long-run outcomes for a monopolistically competitive firm?
A) A 
B) B 
C) C 
D) D

Quizplus · Accepted Answer

Graph C shows the firm making supernormal profits in the long run, which is not possible for a monopolistically competitive firm. In the long run, the firm will only earn normal profits as new firms enter the market and competition increases, driving down prices and eroding profits. Therefore, graph C does not depict a possible outcome for a monopolistically competitive firm. Graphs A, B, and D all show the firm earning normal profits in the long run, which is consistent with the characteristics of monopolistic competition.

Refer to the Above Graphs