Why is it that a monopolistically competitive firm cannot earn positive economic profits in the long run?
What will be an ideal response?
A monopolistically competitive firm can earn positive economic profits only in the short run. In this case, other firms will enter the industry and produce substitutes for the existing firm's product so that its demand curve will become more elastic. Because of the increased competition in the long run, the existing firms' economic profits will disappear.
You might also like to view...
Suppose that a country imports $5.7 billion of goods and services and exports $4.2 billion of goods and services. What is the value of net exports?
A. -$1.5 billion B. $9.9 billion C. -$9.9 billion D. $1.5 billion
Before 2000, the three most recent U.S. recessions occurred in
A) 1969-1973, 1979-1982, and 1994-1995. B) 1973-1975, 1982-1985, and 1990-1991. C) 1973-1975, 1981-1982, and 1990-1991. D) 1981-1982, 1990-1991, and 1998-1999.
Owners of land are compensated according to the
a. absolute level of production from the land. b. number of laborers the land can support. c. purchase price of the land stock. d. value of the marginal product of land.
Suppose an industry has 100 firms, each with supply curve P = 50 + 10Q. Furthermore, suppose the market demand curve is given by P = 200 - 0.9Q. How many units of output will be produced by a firm operating in this market with a MC = 130Q?
A. 5 B. 0.70 C. 2 D. It is impossible to answer with the information given