Description
The discussion is basically designed to help you review the concept of monopolistic competition. We have learned from this Chapter that
In the long-run, a monopolistically competitive firm can only earn a zero profit (which means P = ATC)
Advertising definitely adds to the firm’s costs.
Here are the questions for you to respond to.
If monopolistically competitive firms have some control over their prices, why don’t they set the price above the average total cost so they will realize an economic profit in the long run?
Why do monopolistically competitive firms spend funds for product differentiation and advertising when this practice only adds to the firm’s costs?
Please use the concept learned in Chapter 12 to support your answer
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