In the long-run, surviving firms in monopolistic competition earn:
A) higher pure economic profits.
B) zero pure economic profits.
C) below-normal profits.
D) substantial economic losses.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms have some degree of market power but face competition from other firms. This means that in the long run, other firms are likely to enter the market and compete away any excess profits. Therefore, surviving firms in monopolistic competition earn zero pure economic profits in the long run.

In the Long-Run, Surviving Firms in Monopolistic Competition Earn