In the short run,a monopolistically competitive firm
A)must earn zero economic profit
B)may earn positive or negative economic profits
C)will produce output up at the point where TR = TC
D)will be protected from competition by barriers to entry
E)will equate price and marginal cost

Question

Quizplus · Accepted Answer

In the short run, a monopolistically competitive firm may earn positive or negative economic profits. This is because in the short run, some firms may have established a loyal customer base and can charge a higher price than their marginal cost, resulting in positive economic profits. On the other hand, some firms may not be able to differentiate their product enough and may have to charge a lower price than their marginal cost, resulting in negative economic profits.

In the Short Run,a Monopolistically Competitive Firm