In the long run, a firm in monopolistic competition will:
A) operate at a loss.
B) earn an economic profit.
C) just break even with a normal profit.
D) all of the above.

Question

Quizplus · Accepted Answer

In the long run, a firm in monopolistic competition will adjust its output and prices such that it will just break even, earning a normal profit. This is because new firms will enter the market if there are economic profits, driving those profits down to zero, and firms will exit if there are losses, reducing the losses to zero.

In the Long Run, a Firm in Monopolistic Competition Will