General Snacks is a typical firm in a market characterized by the model of monopolistic competition.Initially, the market is initially in long-run equilibrium, and then there is an increase in demand for snacks.In the long run, the economic profits of typical firms in the industry will be:
A)typical of those earned by monopoly firms.
B)positive but less than the level typically earned by monopoly firms.
C)zero.
D)negative.

Question

Quizplus · Accepted Answer

In the long run, firms in monopolistic competition earn zero economic profits due to the entry of new firms attracted by short-term profits, which increases competition and drives profits down to zero.

General Snacks Is a Typical Firm in a Market Characterized