In long-run equilibrium,a firm in monopolistic competition makes
A) an economic profit but the economic profit is less than it would be if the firm was a monopoly.
B) an economic profit that is higher than what it would be if the firm was a monopoly.
C) zero economic profit.
D) an economic profit that is the same amount as it would be if the firm was a monopoly.
E) an economic profit, an economic loss, or zero economic profit.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of monopolistic competition, firms will have zero economic profit. This is because firms will continue to enter the market, attracted by the positive economic profit being made by existing firms. As new firms enter, the demand curve for existing firms becomes more elastic, causing them to reduce their prices and increase their output until they only make zero economic profit. Therefore, the correct answer is C.

In Long-Run Equilibrium,a Firm in Monopolistic Competition Makes