Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? How does this case differ from the monopoly market outcome?

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The The monopolistically competitive firm determines its profit maximizing output level by producing where MR = MC (Q_M in the diagram).The firm determines its price by reading it off of the demand curve above Q_M (price is P_M in the diagram).The firm is earning a positive economic profit as shown by the filled in rectangle in the diagram. This represents a short-run equilibrium;in the long run there can be no positive economic profit for the firm since with easy entry in the long run other firms will enter in and compete away any short run positive economic profit. The key difference between this case and a monopoly case is that demand D is not the entire market demand (as it would be in the monopoly case).D is the portion of the market demand that customers buy from this firm.

Demonstrate Graphically and Explain Verbally the Case of a Monopolistically