In the long run,monopolistically competitive firms:
A)always earn high economic profits.
B)tend to earn zero economic profits.
C)usually incur negative economic profits.
D)usually incur substantial economic losses.

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms tend to earn zero economic profits due to the ability of new firms to enter the market and compete against existing firms. This competition will decrease demand and decrease the market power of the individual firms, ultimately leading to reduced profits. However, due to product differentiation, monopolistically competitive firms may earn positive economic profits in the short run.

In the Long Run,monopolistically Competitive Firms