Which of the following is not a characteristic of monopolistic competition?
A)The market is fragmented.
B)There is free entry and exit.
C)In the long-run equilibrium, firms earn positive profits.
D)Firms produce horizontally differentiated products.

Question

Quizplus · Accepted Answer

Monopolistic competition is characterized by a fragmented market with free entry and exit, and firms producing horizontally differentiated products. However, in the long-run equilibrium, firms in monopolistic competition earn zero economic profits, not positive profits. In the long-run equilibrium of monopolistic competition, firms earn zero economic profits, as free entry and exit lead to competition eroding the positive profits in the long run. Therefore, option C is not a characteristic of monopolistic competition.

Which of the Following Is Not a Characteristic of Monopolistic