Which of the following is true?
A) Monopolists, monopolistically competitive firms and perfectly competitive firms all earn positive economic profits in the long run.
B) Monopolists, monopolistically competitive firms and perfectly competitive firms all earn zero economic profits in the long run.
C) Only monopolists and monopolistically competitive firms, but not perfectly competitive firms, can earn positive economic profits in the long run.
D) Monopolists, monopolistically competitive firms and perfectly competitive firms can potentially all earn positive economic profits in the short run.

Question

Quizplus · Accepted Answer

In the short run, all types of firms can potentially earn positive economic profits, as market conditions may temporarily shift in their favor. However, in the long run, only monopolistic firms may earn positive economic profits as they have the ability to differentiate their products and create barriers to entry for competitors. Perfectly competitive firms will earn zero economic profits in the long run due to competition driving prices down to the level of minimum average total cost, while monopolists may earn positive economic profits due to their ability to set prices above marginal cost.

Which of the Following Is True