The difference between short-run demand and long-run demand for a monopolistic competitor is
A)There is no difference between long-run and short-run demand for a monopolistic competitor.
B)long-run demand results in no economic profit, whereas short-run demand might result in profits or losses.
C)in the long run demand slopes downward, but in the short run it is horizontal.
D)the long-run demand is elastic, whereas the short-run demand is inelastic.
E)in the short run demand slopes downward, but in the long run it is horizontal.

Question

Quizplus · Accepted Answer

In the short run, a monopolistic competitor may have the ability to set prices above marginal cost and earn economic profit. However, in the long run, other firms may enter the market and compete away the profits, leading to a situation where the demand curve faced by the firm becomes tangent to the ATC curve at the profit-maximizing quantity, resulting in zero economic profit. Therefore, long-run demand results in no economic profit, whereas short-run demand might result in profits or losses.

The Difference Between Short-Run Demand and Long-Run Demand for a Monopolistic