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    Findind equilbrium for monopolistically competitive firm

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    At its current output level of X = 10, a monopolistically competitive firm has MR = 4, MC =4 ,ATC= 6, and P=8. Is this market in long-run equilibrium? If not, please describe the adjustment process necessary to achieve long-run equilibrium.

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    Solution Preview

    Given that this is a monopolistically competitive firm.

    and MR=MC=4
    Since the Price P (=8)> ATC=(6)
    In this case firm is in earning a profit.
    This is a typical case of short term ...

    Solution Summary

    Solution describes the conditions for short term equilibrium conditions for monopolistically competitive firm. It also looks the effect in long run profitability.