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3. A zero

In the long run, economic profit is zero because there is no barrier to entry (more furthers will enter the market if it is a profitable industry). Always think about your local restaurants when dealing with monopolistic competitions.

5. B $3

The profit maximizing rule (which I basically say a million times in every problem set) is MR = MC. The rest is about reading off of the graph.

7. C lower average willingness to pay.
This is intuitive. If people are less willing to pay, we charge a lower ...