Which of the following statements is true?
A)Monopolistic competitive firms will earn economic profits in the long run because of their ability to control the price of the product.
B)Monopolistic competitive firms that earn economic profits in the short run commonly will find their profits competed away in the long run.
C)Monopolistic competitive firms will earn zero economic profits in both the short and the long run.
D)Monopolistic competitive firms must earn economic profits in the long run, or they will shut down.
E)Monopolistic competitive firms must earn economic profits in the short run, or they will shut down.

Question

Quizplus · Accepted Answer

Monopolistic competitive firms may earn economic profits in the short run due to product differentiation and market power. However, in the long run, the entry of new firms attracted by these profits erodes the market power of existing firms, leading to zero economic profit.

Which of the Following Statements Is True