Figure 13-2

-The force that leads to zero economic profits for monopolistically competitive firms in the long run is
A)excess capacity.
B)price wars among firms.
C)entry by new firms.
D)excessive advertising.

Question

Figure 13-2
​ 
-The force that leads to zero economic profits for monopolistically competitive firms in the long run is
A)excess capacity. 
B)price wars among firms. 
C)entry by new firms. 
D)excessive advertising.

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms will experience entry by new firms, increasing competition and leading to zero economic profits. Excess capacity and excessive advertising may contribute to higher costs, but they do not directly lead to zero economic profits. Price wars are also not a necessary condition for zero economic profits, as firms can differentiate their products and compete on non-price factors.

Figure 13-2 ​

Figure 13-2