The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-As a firm in a monopolistically competitive market successfully differentiates its products and earns a positive economic profit, it is soon imitated by its rivals and profit of the firm falls to zero.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-As a firm in a monopolistically competitive market successfully differentiates its products and earns a positive economic profit, it is soon imitated by its rivals and profit of the firm falls to zero.

Quizplus · Accepted Answer

This statement is generally true for monopolistically competitive markets as products are easily imitated and firms must continuously differentiate to maintain their economic profits.

The Table Below Shows the Payoff (Profit) Matrix of Firm