Suppose there are many independent dry cleaners in your city, each of which is earning economic profits. According to the theory of monopolistic competition,
◦ existing dry cleaners will expand until they reach the quantity associated with minimum long-run average cost.
◦ existing dry cleaners will cooperate and restrict entry of new firms.
◦ new dry cleaners will enter this market until each firm is earning zero profits.
◦ existing dry cleaners will cooperate and maximize their joint profits.
◦ existing dry cleaners will engage in non-price competition and maintain their profits in the long run.
Economic objectives of firms
economic question
economic question
economic question
economic question
economic question