The primary reason why monopolistically competitive firms cannot earn an economic profit in the long run is because

Question

Quizplus · Accepted Answer

In monopolistically competitive markets, there is freedom of entry which means that new firms can easily enter the market and offer similar products, increasing competition and reducing market share and profits for existing firms. As a result, in the long run, firms in monopolistically competitive markets only earn a normal profit or zero economic profit. This is because any profits earned in the short run will attract new entrants, driving down prices and reducing profits in the long run. Thus, the absence of barriers to entry prevents monopolistic competition firms from earning economic profits in the long run.

The Primary Reason Why Monopolistically Competitive Firms Cannot Earn an Economic