In the long run, monopolistically competitive firms make zero economic profit because of

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms make zero economic profit primarily due to easy entry and exit in the market. When firms in such a market are making economic profits, new firms are attracted to enter due to the low barriers to entry. This increases competition and drives down prices and profits until firms are just covering their opportunity costs, resulting in zero economic profit.

In the Long Run, Monopolistically Competitive Firms Make Zero Economic