In the monopolistic competition model,the attribute of free entry suggests that:
A) all firms earn zero economic profits in the long run.
B) some firms will be able to earn economic profits in the long run.
C) some firms will be forced to incur economic losses in the long run.
D) the market structure will eventually be characterized by perfect competition in the long run.

Question

Quizplus · Accepted Answer

In monopolistic competition, free entry and exit of firms lead to zero economic profits in the long run as new firms enter when existing firms earn profits, driving profits down to zero.

In the Monopolistic Competition Model,the Attribute of Free Entry Suggests