A monopolistic competitor can expect to earn an economic profit in the long run.

Question

Quizplus · Accepted Answer

In the long run, monopolistic competition leads to zero economic profit as new firms enter the market and compete on the same product differentiation. This results in a decrease in demand for the existing firms, leading to lower prices and lower profits. Therefore, a monopolistic competitor cannot expect to earn an economic profit in the long run.

A Monopolistic Competitor Can Expect to Earn an Economic Profit