In the long run, monopolistically competitive firms:
A) earn zero economic profit.
B) face perfectly elastic demand curves.
C) tend to standardize their products.
D) produce output at minimum marginal cost.
E) merge and form a few dominant firms to maximize profit.

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms tend to earn zero economic profit due to the presence of low barriers to entry and exit, allowing new firms to enter the market and compete with existing firms, leading to a decrease in demand and profits for all firms. This situation leads to firms adjusting their prices and output in order to maintain a level of demand that allows them to break even. Therefore, choice A is the best option.

In the Long Run, Monopolistically Competitive Firms