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Exhibit 10-1 A monopolistic competitive firm Price, costs, and revenue (dollars) 10 0 200 1,000 400 600 800 Quantity of outpu
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Answer #1

The monopolistically competitive industry the profit maximization point is equal to that of the marginal revenue when it is equal to that of the marginal cost and in this case at 400 units output MC = MR and here average total cost is equal to that of $10 and price is equal to 15 dollars. Therefore the monopolistically competitive firm earns a positive profit and this motivate meaning new firms to enter the industry as there are no barriers in the long run new firms enter to reduce the profit to zero.

Therefore (c) is the answer to this question

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