If all firms in a monopolistic competitive industry have demand and cost curves like those shown in Exhibit 10-3, we would expect that in the long run:
A) a number of new firms will enter the industry.
B) some firms will leave the industry.
C) firms in the industry earn zero economic profits.
D) all firms will leave the industry.

Question

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.

If All Firms in a Monopolistic Competitive Industry Have Demand