Among the following situations, which one is least likely to apply to a monopolistically competitive firm?
A)profit is positive in the short run
B)total cost exceeds total revenue in the short run
C)profit is positive in the long run
D)total revenue equals total cost in the long run

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, firms are likely to make positive economic profits in the short run due to the ability to set prices above their marginal cost. However, entry by new firms will drive down demand and lead to a decrease in profits in the long run. Therefore, it is least likely that a monopolistically competitive firm will make positive profits in the long run (option C). Options A and B are possible short-run scenarios, while option D is a possible long-run scenario but not the least likely for a monopolistically competitive firm.

Among the Following Situations, Which One Is Least Likely to Apply