Monopolies can earn positive economic profits in the long run while monopolistically competitive firms cannot due to

Business

1 answer:

inessss [21]3 years ago

4 0

Answer:

barriers to entry in monopoly but not in monopolistic competition.

Explanation:

Imagine a situation where a monopolistically competitive firm is doing very well and is able to earn economic profit (profits higher than normal) in the short run. Since this company is earning higher than normal profits, other companies will enter the market and start competing against them hoping to get a piece of that abnormally high gain. As more competitors enter the market, economic profits will start to decrease until finally they are eliminated.

Since monopolies do not face competition, they can earn economic profits in the long run.

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