The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-A monopolistically competitive firm may earn above normal profits or may incur losses in the short run.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-A monopolistically competitive firm may earn above normal profits or may incur losses in the short run.

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm may earn above normal profits if it is able to differentiate its product successfully and charge a higher price than its competitors. However, it may also incur losses if it is not able to cover its costs.

The Table Below Shows the Payoff (Profit) Matrix of Firm