In the long run,a monopolistically competitive firm

Question

Quizplus · Accepted Answer

In the long run, a monopolistically competitive market contains firms with differentiated products and relatively easy entry and exit. This means that firms can adjust their prices and quantities in response to changes in demand and costs, but they also face competition from other firms. As a result, firms in a monopolistically competitive market tend to earn zero economic profit in the long run, since any positive profits would attract new competitors and drive down prices and profits over time. Therefore, choice A is the best answer. Choices B and C are not necessarily true for all firms in a monopolistically competitive market, as firms may operate at different levels of capacity and cost efficiency depending on their specific circumstances.

In the Long Run,a Monopolistically Competitive Firm