To sum up, two characteristics describe the long-run equilibrium in a monopolistically competitive market: Show As in a monopoly market, price exceeds marginal cost (P > MC). This conclusion arises because profit maximization requires marginal revenue to equal marginal cost (MR = MC) and because the downward-sloping demand curve makes marginal revenue less than the price (MR < P). As in a competitive market, price equals average total cost (P = ATC). This conclusion arises because free entry and exit drive economic profit to zero. The second characteristic shows how monopolistic competition differs from monopoly. Because a monopoly is the sole seller of a product without close substitutes, it can earn positive economic profit, even in the long run. By contrast, because there is free entry into a monopolistically competitive market, the economic profit of a firm in this type of market is driven to zero. Recommended textbook solutions
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Principles of Economics8th EditionN. Gregory Mankiw 1,335 solutions Principles of Economics7th EditionN. Gregory Mankiw 1,394 solutions Why do monopolistic competition make zero profit in the long run?In the long-run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.
Are long run profits zero in monopolistic competition?Companies in a monopolistic competition make economic profits in the short run, but in the long run, they make zero economic profit. The latter is also a result of the freedom of entry and exit in the industry.
When a monopolistically competitive firm is in long run equilibrium economic profit is zero?For a monopolistically competitive firm in long-run equilibrium b. price will equal the average total cost. In the long run, a monopolistically competitive firm makes zero economic profits. When a producer is making zero economic profits, the price is identical to the average total cost, that is, P = ATC.
What type of profit is made by monopolistic competition in the long run?Do monopolistic competitive firms make a profit in the long run? The market will be at equilibrium in the long run only if there is no exit or entry in the market anymore. Thus, all firms make zero profit in the long run.
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Quizlet in the long run, profits in a monopolistically competitive market are zero because:
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