Chapter 67, Problem 2MCQ

To determine

To choose: from the given options the one that exists for a monopolistic competitor in the short run.

Answer to Problem 2MCQ

The correct option is A i.e. positive economic profit.

Explanation of Solution

In the short run, firms should always produce a quantity where the marginal revenue equals marginal cost i.e. MR= MC, this leads to maximization of profits or minimization of losses, depending on their average total cost (ATC).

So, a monopolistic competitor in the short run earns a positive economic profit.