A monopolistically competitive firm that earns economic profits in the short run will face a more elastic demand curve in the long run.

Question

Quizplus · Accepted Answer

In the long run, other firms can enter the market and offer similar products, making the demand for the firm's product more elastic as consumers have more options to choose from. This increased competition will reduce the firm's market power and lead to a decrease in economic profits.

A Monopolistically Competitive Firm That Earns Economic Profits in the Short