In the short run,the monopolistically competitive firm will experience:
A) an economic profit,and also one in the long run.
B) a normal profit,but in the long run only an economic profit.
C) economic profits or losses,but in the long run only a normal profit.
D) economic profits or losses,but in the long run only an economic profit.

Question

Quizplus · Accepted Answer

In the short run, monopolistically competitive firms can have economic profits or losses due to their ability to differentiate their products and exert some control over the price. However, in the long run, new firms will enter the market attracted by the profits, which will increase competition and reduce demand for existing firms' products. As a result, the monopolistically competitive firm will only be able to earn a normal profit, which covers the opportunity cost of resources and provides a return on investment in the long run. Therefore, the correct option is C, which states that the monopolistically competitive firm will experience economic profits or losses in the short run but only a normal profit in the long run.

In the Short Run,the Monopolistically Competitive Firm Will Experience