Monopolistically competitive firms: a will set price where MC > MR. b earn a positive economic profit if price is greater than ATC. c engage in collusive activity in order to maximize profit. d are regulated by the government to keep long-run economic profits equal to zero. e are very similar to perfect competitors in producing at the minimum ATC.

Monopolistically competitive firms are regulated by the government to keep long-run economic profits equal to zero.

Explanation:

Monopolistic competition is a type of imperfect competition with many sellers selling similar, but not identical products and there are not perfect substitutes.

In the short run, a monopolistically competitive firm will select the rate of output where marginal revenue equals marginal cost. In the long-run monopolistically competitive firms are regulated by the government to keep long-run economic profits equal to zero.

B) earn a positive economic profit if price is greater than ATC.

Explanation:

Monopolistically competitive markets are not monopolies, they are markets will many suppliers that provide differentiated products, e.g. restaurants.

In order to maximize their accounting profits, they must sell their products at a price where marginal revenue (MR) = marginal costs (MC). Monopolistically competitive firms do not produce at minimum average total cost, because they generally operate with excess capacity. Excess capacity = quantity produced at minimum ATC - quantity that yields the greatest profits (MR = MC).

Monopolistically competitive firms can earn economic profit if their price is higher than ATC.

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