Unlike a perfectly competitive firm,a monopolistically competitive firm:
A)makes zero economic profits in the short run.
B)caters to a large portion of the market.
C)does not face barriers to entry and exit.
D)sells a differentiated product.

Question

Quizplus · Accepted Answer

A monopolistically competitive firm sells a differentiated product, meaning that it has some degree of market power to set its own price. This is in contrast to a perfectly competitive firm, which sells a homogeneous product and has no market power. Monopolistically competitive firms may make economic profits in the short run, but in the long run, other firms will enter the market and create competition, driving profits to zero. Additionally, monopolistically competitive firms may face some barriers to entry, such as brand recognition or access to specific resources, but they do not have the same barriers as monopolies.

Unlike a Perfectly Competitive Firm,a Monopolistically Competitive Firm