The company produces a good or service at a price where marginal revenue and marginal cost are equal, and it bases its price on the demand curve.
What are the short run equilibrium conditions of a monopolistically competitive firm?
- A monopolistically competitive firm's short-term equilibrium is the same as a monopoly firm's. The company produces a good or service at a price where marginal revenue and marginal cost are equal, and it bases its price on the demand curve.
- A monopolistically competitive company optimises profits or minimises losses in the short run by producing the amount where marginal revenue equals marginal cost. The company will make an economic profit if the average total cost is lower than the market price.
- In a market where entry and exit are simple, monopolistic competition is characterised by a large number of businesses producing comparable but differentiating goods. The restaurant industry is monopolistically competitive; there are typically several enterprises, each of which is unique, and entry and exit are both fairly simple.
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