Which of the following is TRUE?
A) All markets should be oligopolies because that is the most efficient market structure.
B) Monopolistic competition results in excess capacity, since in the long run the point where MR = MC is to the right of the minimum of the ATC curve.
C) In monopolistic competition firms earn large economic profits in the long run.
D) In monopolistic competition firms earn zero economic profits in the long run.

Question

Quizplus · Accepted Answer

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

Which of the Following Is TRUE