c) Long-run

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Last updated 8:06 PM on 6/28/26
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4 Terms

1
New cards

  • state what type of profit firms in monopolistic competition make in the long-run

  • state why

  • normal

  • low barriers to entry and exit

  • firms easily enter and exit the market

  • supply fluctuates

2
New cards

  • explain why firms in monopolistic competition making supernormal profit in the short-run make normal profit in the long-run

  • supernormal profit → attracts new firms

  • elastic demand + AR shifts left

  • AR = ATC

  • price decreases

3
New cards

  • explain why firms in monopolistic competition making a loss in the short-run make normal profit in the long-run

  • loss → firms leave market

  • inelastic demand + AR shifts right

  • AR = ATC

  • price increases

4
New cards

  • n/a

  • n/a