Question

In the long run, the economic profits for a monopolistically competitive firm will be rev: 05_15_2018 Multiple Choice the same as the profits for a monopolist. the same as the profits for a purely competitive firm. slightly less than the profits of a monopolist. slightly more than the profits of a purely competitive firm.

Answer 1

Answer:

The correct answer is same as the profits of a purely competitive firm.

Explanation:

A monopolistic market is characterized by a large number of sellers producing differentiated products which are close substitutes. This market has a relatively easier entry as compared to a monopoly market.  

In the long-run when a monopolistic firm will be earning a positive profit. It will attract other firms to join the market. As new firms enter the market, the market supply will increase. A rightward shift in the market supply curve will cause the price level to decline. This will continue till all the profits decline to zero.

So, similar to a purely competitive firm, a monopolistic firm also earn zero economic profit in the long run.