A monopolistically competitive firm
A)has the usual deadweight loss of monopoly pricing.
B)experiences a zero profit in a long-run equilibrium.
C)is said to have excess capacity.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some market power leading to deadweight loss (A), they earn zero economic profit in the long run due to free entry and exit (B), and they operate with excess capacity as they do not produce at the minimum of their average total cost (C).

A Monopolistically Competitive Firm