In both perfectly competitive and monopolistically competitive markets, when firms are making positive economic profits, other firms will enter until price equals ATC and profits are zero. Despite these similarities, in a perfectly competitive market total surplus is maximized, while in a monopolistically competitive market surplus is not maximized. Explain this difference.

In both perfectly competitive and monopolistically competitive markets, when firms are making positive economic profits, other firms will enter until price equals ATC and profits are zero. Despite these similarities, in a perfectly competitive market total surplus is maximized, while in a monopolistically competitive market surplus is not maximized. Explain this difference.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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In both perfectly competitive and
monopolistically competitive markets, when
firms are making positive economic profits,
other firms will enter until price equals ATC and
profits are zero. Despite these similarities, in a
perfectly competitive market total surplus is
maximized, while in a monopolistically
competitive market surplus is not maximized.
Explain this difference.

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