In the long run, monopolistically competitive firms become perfectly competitive firms.

Question

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Monopolistically competitive firms have some degree of market power due to differentiation of their products, but as more firms enter the market with similar products, the market becomes more competitive and price-driven. This can lead to firms becoming indistinguishable from each other and the market becoming perfectly competitive, where firms have no market power and must accept the prevailing price. However, not all monopolistically competitive markets necessarily become perfectly competitive over time.

In the Long Run, Monopolistically Competitive Firms Become Perfectly Competitive