Question

In the long run, firms under monopolistic competition_____ A. Standardize their products. B. Face perfectly elastic demand curves. C. Earn zero economic profit. D. Produce output at minimum average cost.

Answer 1

Answer:

The correct answer is letter "C": Earn zero economic profit.

Explanation:

For markets that have many companies offering similar products or services, monopolistic competition exists. Restaurants, grocery stores, and clothing stores, for example. Such similar products or services are not ideal replacements for each other in monopolistic competition. In the short run, the economic profit of the firms is positive but in the long run, the economic profit approaches to zero.