Short-Run Monopolistic Competition Equilibrium with Trade When trade is opened, the larger market makes the firm’s demand curve more elastic, as shown by d2 (with corresponding marginal revenue curve, mr2). The firm chooses to produce the quantity Q2 at which marginal revenue equals marginal costs; this quantity corresponds to a price of P2. With sales of Q2 at price P2, the firm will make monopoly profits because price is greater than AC. When all firms lower their prices to P2, however, the relevant demand curve is D/NA, which indicates that they can sell only Q′2 at price P2. At this short-run equilibrium (point B′), price is less than average cost and all firms incur losses. As a result, some firms are forced to exit the industry.