The market for eyeglasses is monopolistically competitive.It follows that firms in the eyeglass industry:

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, firms differentiate their products to create a certain degree of market power. This allows them to charge a slightly higher price than the marginal cost in the short run, which can lead to economic profit. However, in the long run, other firms can enter the market and offer similar products, reducing the market power of existing firms and reducing economic profit to zero. Therefore, firms could earn economic profit in short-run equilibrium, but not in long-run equilibrium (option A is incorrect). Firms do not necessarily charge a price equal to marginal cost (option C is incorrect) or the minimum average total cost (option D is irrelevant in this context).

The Market for Eyeglasses Is Monopolistically Competitive