A profit-maximizing firm in a monopolistically competitive market can earn positive, negative, or zero profits in the short run.

Question

Quizplus · Accepted Answer

In the short run, a firm in a monopolistically competitive market can earn positive profits due to product differentiation and brand loyalty, negative profits if costs exceed revenues, or zero economic profits if it operates at the point where price equals average total cost.

A Profit-Maximizing Firm in a Monopolistically Competitive Market Can Earn