General Snacks is a typical firm in monopolistic competition.Initially,the market is in long-run equilibrium,and then there is an increase in the market demand for snacks.In the long run,the economic profits of typical firms in the industry will be:
A)typical of those earned by monopoly firms.
B)positive but less than the level typically earned by monopoly firms.
C)zero.
D)negative.

Question

Quizplus · Accepted Answer

In the long run, firms in monopolistic competition earn zero economic profits due to the entry of new firms attracted by the initial profits, which increases competition and drives prices down until profits are eliminated.

General Snacks Is a Typical Firm in Monopolistic Competition