MONOPOLISTIC COMPETITION

 THE MONOPOLISTICALLY COMPETITIVE FIRM IN THE SHORT RUN

o MR=MC => P
o P > ATC => PROFIT
o P < ATC => LOSS (The best way the firm can do is to minimize its losses)
 THE LONG-RUN EQUILIBRIUM
o PROFIT => MORE FIRMS ENTER THE MARKET => ENTRY SHIFTS THE
DEMAND CURVES TO THE LEFT => DECLINING PROFIT
o LOSS => MORE FIRMS EXIT THE MARKET => EXIT SHIFTS THE DEMAND
CURVE TO THE RIGHT => INCREASING THE PROFIT
 ECONOMIC PROFIT = ZERO