Monopolistic competition is like perfect competition in the sense that easy entry and exit eliminate economic profit or economic loss in the long run.

Question

Quizplus · Accepted Answer

In both monopolistic competition and perfect competition, the presence of easy entry and exit of firms ensures that in the long run, firms will only make normal profits, eliminating economic profit or loss. This is because if firms in either market structure start making economic profits, new firms will enter the market, increasing supply and driving down prices and profits. Conversely, if firms are making losses, some will exit the market, reducing supply and increasing prices and profits back to normal levels.

Monopolistic Competition Is Like Perfect Competition in the Sense That