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Monopolistically competitive firms have zero economic profits in the long run because of:
A) excess capacity.
B) price wars among firms.
C) easy entry and exit.
D) excessive advertising.
Zero Economic Profits
A condition in perfect competition where firms earn just enough revenue to cover their total costs, leading to no supernormal profit in the long term.
Monopolistically Competitive
A market structure where many firms sell products that are similar but not identical, allowing for significant brand differentiation and some control over prices.
Long Run
A period in economics during which all factors of production and costs are variable, allowing for full adjustment to change.
- Master the fundamentals of how monopolistic competition attains equilibrium in the immediate and distant future, specifically under the zero-profit condition.
- Clarify the repercussions of company initiation and cessation on the structural dynamics of the market and on the economic profitability of individual corporations engaged in monopolistic competition.
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Learning Objectives
- Master the fundamentals of how monopolistic competition attains equilibrium in the immediate and distant future, specifically under the zero-profit condition.
- Clarify the repercussions of company initiation and cessation on the structural dynamics of the market and on the economic profitability of individual corporations engaged in monopolistic competition.
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