The market for eyeglasses is monopolistically competitive.It follows that firms in the eyeglass industry:

Question

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In a monopolistically competitive market, firms have some control over the price they charge due to differentiated products. This means they can potentially earn economic profit in the short run by charging a price higher than their average variable cost. However, in the long run, entry and exit of firms will drive economic profit to zero, resulting in only normal profit being earned. Choice A is incorrect because economic profit cannot be earned in the long run equilibrium. Choice C is incorrect because firms cannot charge a price equal to marginal cost due to market power. Choice D is incorrect because firms do not necessarily charge a price equal to minimum average total cost, as they have some control over price.

The Market for Eyeglasses Is Monopolistically Competitive