Assume that in short-run equilibrium, a particular monopolistically competitive firm charges $12 for each unit of its output and sells 52 units of output per day. How much revenue will it take in each day? If the average total cost (ATC) for those 52 units is $10, will the firm (a) earn a short-run economic profit, (b) break even with only a normal profit, or (c) suffer an economic loss? If a profit or loss, what will be the amount? Next, suppose that entry or exit occurs in this monopolistic industry and establishes a long-run equilibrium. If the firm’s daily output remains at 52 units, what price will it be able to charge? What will be its economic profit?
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