Microeconomics
Microeconomics
13th Edition
ISBN: 9781337617406
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 11.1, Problem 2ST
To determine

Explain why the monopolistic competitors operate at excess capacity.

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If the firms in a monopolistically competitive market are earning economic profits or losses in the short run, would you expect them to continue doing so in the long run? Why?
What factors hinder firms in monopolistic competition from earning economic profits in the long run?
Monopolistically competitive firms could increase the quantity they produce and potentially lower the average total cost of production. Why don't they do so?
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