Which of the following statements is TRUE about the economic profits earned by a monopolistic competitor firm in the long run?

Question

Quizplus · Accepted Answer

In the long run, monopolistic competitors will not earn economic profits as new firms will enter the market to take advantage of the profits being earned. This increase in competition will drive down demand and increase costs, ultimately leading to zero economic profits. Therefore, option C is the correct choice as it presents this concept. Option A is incorrect because while firms do have some degree of monopoly power, it does not necessarily lead to positive economic profits in the long run. Option B is incorrect because having a downward sloping demand curve alone does not ensure economic profits. Option D is incorrect because while there is competition in the market, it is not necessarily the sole reason for negative economic profits.

Which of the Following Statements Is TRUE About the Economic