10.5 : 独占的競争下における短期均衡

In the short run, a firm in monopolistic competition will be at an equilibrium point, which denotes the profit-maximizing quantity of output. At this point, marginal cost equals marginal revenue.

Point A marks the profit-maximizing quantity. By aligning this quantity with the demand curve, the firm sets a price that yields an economic profit. The area between price and average cost represents economic profit.

The firm earns an economic profit if the price exceeds ATC at the profit-maximizing quantity. If the price is equal to ATC, the firm breaks even, and if the price is below ATC, the firm incurs losses.

When firms earn an economic profit, they attract new entrants into the market, which increases competition.

Over time, this increased competition decreases the initial profits, and the market moves towards zero economic profit.

As a result, in the long run, firms may only earn an economic profit if they continue to innovate or differentiate their products to maintain a competitive edge.