In the short run, a monopolistically competitive firm

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In the short run, a monopolistically competitive firm can earn positive, negative, or zero economic profits. This is because the firm has some degree of market power, allowing it to charge a price above its marginal cost, but also faces competition from other firms selling similar but not identical products, which limits its ability to raise prices without losing customers. Therefore, the firm's profitability depends on its ability to differentiate its product and attract customers, as well as on the level of competition in the market. The firm may earn positive economic profits if it successfully differentiates its product and attracts enough customers to cover its fixed costs and earn a profit, or it may earn negative economic profits if it fails to do so and incurs losses. Alternatively, it may earn zero economic profits if it earns enough revenue to cover its variable costs but not its fixed costs. Accounting profits may be positive, negative, or zero, depending on the firm's accounting practices, but they do not necessarily reflect the economic profitability of the firm.

In the Short Run, a Monopolistically Competitive Firm