Long-run profits of individual firms in monopolistic competition will be larger than their short-run profits.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms may earn profits in the short run, but in the long run, the entry of new firms into the market increases competition and reduces the demand for any individual firm's product, leading to a decrease in profits until they reach a normal profit level.

Long-Run Profits of Individual Firms in Monopolistic Competition Will Be