This blog has been created to provide an area for economics students to read about how economics impacts daily life. It is especially useful for students to understand the application of macroeconomics as communicated through the media and governmental websites.

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Brief description: In the short run the firm in monopolistic competition my be able to make supernormal profits, but in the long run these will be competed away and the firm will only be able to make normal profit.

Detailed description: In the short run and long run the firm will profit maximise where marginal cost equals marginal revenue. In the short run average revenue may exceed average cost and the firm may make supernormal profit. However, in the long run new firms will be attracted into the industry by the supernormal profits. This will shift the average revenue curve to the left until eventually average revenue is equal to average cost - normal profit.