Suppose that you own a 25 year old movie theater in Micropolis. It has 6 screens and a concession stand. Across town there is a 7 year old movie theater with 4 IMAX screens and 20 more regular screens. Your competitor’s movie theater also has stadium seating for all screens and two concessions stands. Remember this is a small to mid-sized city with a small to moderate sized customer base.
Do you think that your firm (the small theater) will have substantial pricing power based on being a monopolistic competition? What are your short-run and long-run profit expectations?