In the short-run, firms in a monopolistically competitive market will earn zero economic profit.

Question

Quizplus · Accepted Answer

In the short-run, firms in monopolistically competitive markets can earn positive economic profit or incur losses. This is because they have some degree of control over the price they charge due to product differentiation, but still face competition from other firms in the market. However, in the long-run, economic profits will be driven to zero due to the entry of new firms attracted by the potential profits.

In the Short-Run, Firms in a Monopolistically Competitive Market Will