A monopolistically competitive firm is like a perfectly competitive firm in the long run because
A) both firms will earn positive economic profit.
B) the demand curve for both firms will be horizontal.
C) both firms will earn a normal profit.
D) both firms can increase price in order to increase profits.

Question

Quizplus · Accepted Answer

In the long run, both monopolistically competitive firms and perfectly competitive firms will earn a normal profit, meaning they cover all their costs, including opportunity costs, but do not earn economic profits above this level. This is because entry and exit in the market adjust until only normal profits are made.

A Monopolistically Competitive Firm Is Like a Perfectly Competitive Firm