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The monopolistically competitive firm’s long‐run equilibrium situation is illustrated in Figure . … Thus, in the long‐run, the competition brought about by the entry of new firms will cause each firm in a monopolistically competitive market to earn normal profits, just like a perfectly competitive firm. Excess capacity. Are monopolisticallyRead More →

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When there are few firms in the market, they may collude to set a price or output level for the market in order to maximize industry profits. As a result, price will be higher than the market-clearing price, and output is likely to be lower. … The promise of biggerRead More →