In theory,in the long run,monopolistically competitive firms earn zero profits.However,in reality,there are some ways by which a firm can avoid losing profits.Which of the following is one such way?

Question

Quizplus · Accepted Answer

By identifying new markets and developing products precisely for those markets, the firm can differentiate its products and reduce competition, which can result in higher profits in the long run. Gradually increasing the markup or keeping a narrow market niche can only provide temporary relief from competition and may not be sustainable in the long run. Lowering prices can lead to a price war and erode profits for all firms involved.

In Theory,in the Long Run,monopolistically Competitive Firms Earn Zero Profits