In theory, in the long run, monopolistically competitive firms earn zero profits.However, in reality there are some ways by which a firm can avoid losing profits.Which of the following is one such way?
A)gradually increase the mark-up on the goods produced
B)lower the price of its products to expand its market share
C)identify new markets and develop products precisely for those markets
D)find a market niche and keep it as narrow as possible so as to prevent other producers from entering this market segment

Question

Quizplus · Accepted Answer

By identifying new markets and developing products precisely for those markets, a firm can differentiate its products and create a unique value proposition, which can give it a competitive edge over its rivals. This can allow the firm to charge a higher price for its products, and thereby earn profits in the long run. Gradually increasing the mark-up or lowering prices may not be sustainable strategies, as they can lead to a loss of market share or erode profit margins. Finding a narrow market niche may also not be a viable option, as it can limit the growth potential of the firm and make it susceptible to new entrants.

In Theory, in the Long Run, Monopolistically Competitive Firms Earn