The industry for personal care products in Richland is monopolistically competitive in nature. The firms in this industry earn positive economic profits in the short run
Do the firms continue to earn positive profits in the long run? Explain your answer.
If firms in a monopolistically competitive market earn positive economic profits, new firms enter the industry in the long run. As new firms enter the industry, the demand curves faced by the existing firms become flatter. This is because demand for a good becomes more elastic when there are more substitutes. The demand curve faced by existing firms also shifts to the left because market demand is now split between more firms. As a result, the firms optimize at a lower quantity and charge a lower price for their respective products. This in turn reduces the profits earned by the firms in the industry. The entry of new firms continues until the existing firms earn zero economic profits.
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Which of the following statements about commission systems of compensation is false?
A) During sluggish periods, an employer's payroll expenses will decline along with sales. B) If workers are paid on the basis of the number of units produced, they may become less concerned about quality. C) They increase the risk to workers because sometimes output declines for reasons not connected to the worker's effort. D) The lack of income stability will induce the more productive workers to leave in search of more secure employment.
The M1 definition of the money supply includes:
a. currency in circulation and checkable deposits. b. Federal Reserve Notes, gold certificates, and checkable deposits. c. Federal Reserve Notes and bank loans. d. None of these.
Failure of market outcomes can occur even when the market is functioning properly.
Answer the following statement true (T) or false (F)
Suppose the wage rate in a certain industry rises, yet firms hire more workers. The best explanation of this is that labor:
A. demand fell. B. demand increased. C. supply fell. D. supply increased.