Exhibit 10-2 A monopolistic competitive firm
-If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:
A) all firms will leave the industry.
B) some firms will leave the industry.
C) firms in the industry earn zero economic profits.
D) a number of new firms will enter the industry.

Question

Exhibit 10-2 A monopolistic competitive firm 
-If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-2, we would expect that in the long run:
A) all firms will leave the industry. 
B) some firms will leave the industry. 
C) firms in the industry earn zero economic profits. 
D) a number of new firms will enter the industry.

Quizplus · Accepted Answer

In the long run, firms in a monopolistic competitive industry earn zero economic profits due to the entry and exit of firms, which drives profits to a normal level.

Exhibit 10-2 a Monopolistic Competitive Firm