Monopolistically-competitive firms typically make economic profits in the long run.

Question

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Monopolistically-competitive markets involve firms selling differentiated products, leading to some degree of market power but also significant competition. In the long run, new firms can enter the market and offer similar products, eroding the market power and profits of existing firms. Therefore, economic profits are typically competed away and firms may only make normal profits in the long run.

Monopolistically-Competitive Firms Typically Make Economic Profits in the Long Run