Which situation is least likely to apply to a monopolistically competitive firm

Question

Quizplus · Accepted Answer

Monopolistically competitive firms usually have some degree of market power due to product differentiation. This means that they can set prices above marginal costs in the short run, generating positive profits. However, in the long run, profits attract new firms to the market, increasing competition and driving down prices. As a result, monopolistically competitive firms typically experience zero economic profits in the long run, although they still earn normal profits. This makes choice C (profit is positive in the long run) the least likely situation for a monopolistically competitive firm.

Which Situation Is Least Likely to Apply to a Monopolistically