In the Long Run, a Monopolistically Competitive Firm Earns Zero

question 97

True/False

In the long run, a monopolistically competitive firm earns zero economic profit because its demand curve is tangent to its average fixed cost curve.

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Definitions:

Labor

Refers to human effort, both physical and mental, used in the production of goods and services.

Output

Output is the quantity of goods or services produced by a company, industry, or economy within a specified period.

Average Product

The output per unit of input, calculated by dividing total output by the quantity of inputs.

Law of Diminishing Returns

An economic principle stating that as additional units of a factor of production are added to a fixed amount of another factor, the incremental increase in output will eventually decrease.