Monopolistically competitive firms earn zero economic profit in the long run as do perfectly competitive firms. Does this mean that total surplus is maximized in a monopolistically competitive market?
What will be an ideal response?
No, total surplus is not maximized in a monopolistically competitive market. A monopolistic competitor has a certain degree of market power. The key is that there are potential sales that would increase total surplus that are not realized because the monopolistically competitive firm restricts quantity to keep price higher. So even though price is equal to average total cost, it is not equal to marginal cost.
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A firm will shut down in the short run if
A. MR < AVC. B. MR > AVC. C. AVC < AFC. D. P > MC.
When there is an excess of expected net income over the cost of capital
A) abnormal net income is positive. B) accounting profits are negative. C) abnormal net income is negative. D) economic profits minus abnormal net income is negative.
In the spring of 2002, Argentina was forced to devalue its peso and disband its currency board that was responsible for the fixed exchange rate between the peso and the U.S. dollar. Explain the origin of this crisis and the painful remedies that Argentina has had to endure
The "miracle of compound interest" is best described by which of the following?
A) Interest is paid on any currency held in your pockets. B) Interest is paid on the prior interest earned, but not the principal. C) Interest is paid only on the original principal deposited in an account. D) Interest is paid on the principal plus the prior interest earned