In both perfectly competitive and monopolistically competitive markets, when firms are making positive economic profits, other firms willenter until price equals ATC and profits are zero.Despite these similarities, in a perfectly competitive market total surplus is maximized, while ina monopolistically competitive market surplus isnot maximized. Explain this difference.
In both perfectly competitive and monopolistically competitive markets, when firms are making positive economic profits, other firms willenter until price equals ATC and profits are zero.Despite these similarities, in a perfectly competitive market total surplus is maximized, while ina monopolistically competitive market surplus isnot maximized. Explain this difference.
Chapter14: Monopolistic Competition And Product Differentiation
Section: Chapter Questions
Problem 7P
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In both perfectly
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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