For a monopolistically competitive firm to be making an economic profit,

Question

Quizplus · Accepted Answer

In the short run, firms in monopolistically competitive markets can make positive economic profits as they have the ability to set prices above their marginal cost due to product differentiation. However, in the long run, new firms can enter the market and compete away those profits, driving the profits down to zero. Therefore, in the long run, monopolistically competitive firms only earn normal profits, not economic profits.

For a Monopolistically Competitive Firm to Be Making an Economic