The dry cleaning industry is in monopolistic competition. In the short run, the profit-maximizing price is $10 per item and the average total cost is $6 per item. In long-run equilibrium, the profit-maximizing price is $8 per item. In long-run equilibrium, what is the economic profit of a firm in the dry cleaning industry? In long-run equilibrium, the dry cleaning firm makes $ nothing economic profit.

Question

Gabrielle Weber

Business

17 February, 09:28

The dry cleaning industry is in monopolistic competition. In the short run, the profit-maximizing price is $10 per item and the average total cost is $6 per item. In long-run equilibrium, the profit-maximizing price is $8 per item. In long-run equilibrium, what is the economic profit of a firm in the dry cleaning industry? In long-run equilibrium, the dry cleaning firm makes $ nothing economic profit.

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Ireland Schaefer · Answer 1

If the average total cost is $6 per item and the price is $8 per item then the co. will make $2 per item. In the long run equilibrium the co. will make a profit in other words. If the average total cost is $6 per item sometimes it may be a little higher and sometimes a little lower so the actual profit will fluctuate accordingly.