A monopolistically competitive firm that is profitable in the short run will face competition that will eventually eliminate the firm's profits in the long run.But the firm can stave off competition and continue to earn economic profits if
A)it can successfully sue its competitors for copyright infringement.
B)it can move to another country where there is less competition.
C)it can lobby the government to establish a price floor for its product.
D)it can find new ways to differentiate its product.

Question

Quizplus · Accepted Answer

The only way a monopolistically competitive firm can continue to earn economic profits in the long run is if it can differentiate its product from its competitors. By doing so, it creates a loyal customer base that is willing to pay a premium price for that unique product. If the firm continues to innovate and find new ways to differentiate its product, it can stave off competition and continue to earn profits in the long run. The other options (suing competitors, moving to another country, lobbying for a price floor) are not viable solutions to long-term profitability in a monopolistically competitive market.

A Monopolistically Competitive Firm That Is Profitable in the Short