Question

The dry cleaning industry is in monopolistic competition. In the short​ run, the​ profit-maximizing price is​ $10 per item and the average total cost is​ $6 per item. In the long​ run, the​ profit-maximizing price is​ $8 per item. In the long​ run, what is the economic profit of a firm in the dry cleaning​ industry?

Answer 1

Answer:

$ 0

Explanation:

Under monopolistic competition, firms reach equilibrium in the long-run: this equilibrium is a point in which the marginal cost of producing one additional unit of ouput are the same as the marginal revenue from the sale of the same additional unit of output.

In other words, in the long-run, firms under monopolistic competition can only break-even, they do no obtain economic profits.