If a profit-maximizing monopolistic competitor earns positive economic profits in the short run:
A) demand will become increasingly inelastic as new firms enter.
B) the firm should increase its output as new firms enter.
C) there must be barriers to entry into the industry.
D) new firms will be attracted to the industry.
E) both b. and d. are correct.

Question

Quizplus · Accepted Answer

In the short run, positive economic profits attract new firms to the industry, increasing competition and reducing profits in the long run.

If a Profit-Maximizing Monopolistic Competitor Earns Positive Economic Profits in the Short