Subsequently, one may also ask, how do you calculate economic profit in a monopolistic competition?
Monopolistic competition has a downward sloping demand curve.
If average total cost is below the market price, then the firm will earn an economic profit.
- D = Market Demand.
- ATC = Average Total Cost.
- MR = Marginal Revenue.
- MC = Marginal Cost.
Also Know, do monopolistic competition make profit in the long run? In the long–run, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm’s average total cost curve. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.
Secondly, how can monopolistic competition maximize profit?
In a monopolistic market, a firm maximizes its total profit by equating marginal cost to marginal revenue and solving for the price of one product and the quantity it must produce. and setting it equal to zero.
How do you calculate profit maximizing price?
Answer: To find the profit maximizing quantity to sell in Class One equate the MR for Class One to the MC. Thus, 10 – 2Q = 1 or Q = 4.5 units. To find the profit maximizing price use this quantity and demand curve for Class One: P = 10 – Q = 10 – 4.5 = $5.50 per unit sold.