Assume that firms in a monopolistically competitive market are earning a short run economic loss.In the long run,

Question

Quizplus · Accepted Answer

In the long run, firms in a monopolistically competitive market will adjust their production and pricing strategies to reduce the economic losses. This may involve reducing output or increasing efficiency to lower costs. As a result, the market supply curve will shift inward, decreasing the quantity supplied and increasing the price. This process will continue until firms earn zero economic profit, as entry and exit of firms will continue until the remaining firms earn only normal profit. Therefore, in the long run, firms will earn zero economic profit in a monopolistically competitive market.

Assume That Firms in a Monopolistically Competitive Market Are Earning