In the long run, monopolistically competitive firms earn zero economic profits.

Question

Quizplus · Accepted Answer

In the long run, monopolistically competitive firms will see new competitors enter the market and existing competitors improve their products, leading to a decrease in demand for the monopolistically competitive firm's product. This will lead to a decrease in the firm's market power and profits, ultimately resulting in zero economic profits in the long run.

In the Long Run, Monopolistically Competitive Firms Earn Zero Economic