If a monopolistically competitive firm is earning a normal profit, it
A) can expect to see more competitors in the future.
B) can expect to see about the same amount of competition in the future.
C) can expect to see fewer competitors in the future.
D) will probably exit the market in the long run.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, earning a normal profit indicates that the firm is covering all its costs, including opportunity costs. This situation suggests that the market is in a stable state, neither particularly attractive for new entrants nor discouraging for existing firms, leading to about the same amount of competition in the future.

If a Monopolistically Competitive Firm Is Earning a Normal Profit