Which statement concerning monopolistic competition is false?
A) In the long run P = ATC MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products, but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run.

Question

Which statement concerning monopolistic competition is false?
A) In the long run P = ATC > MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products, but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run.

Quizplus · Accepted Answer

In monopolistic competition, firms will experience zero economic profits in the long run because barriers to entry are low, allowing for new firms to enter the market and compete away any economic profits.

Which Statement Concerning Monopolistic Competition Is False