In monopolistic competition and ____ economic profit will move towards zero

Question

Quizplus · Accepted Answer

In perfect competition, firms are price takers and have no market power. Therefore, they cannot earn economic profits in the long run, and economic profit will move towards zero. In monopolistic competition, firms have some market power and can earn economic profits in the short run. However, new firms will enter the market attracted by the profits, increasing competition and causing existing firms to lose some of their market power. As a result, economic profit will also move towards zero in the long run in monopolistic competition. In monopoly and oligopoly, firms have significant market power and can sustain economic profits in the long run.

In Monopolistic Competition and ____ Economic Profit Will Move Towards