Question

In monopolistically competitive industries, economic profits are competed away in the long run; hence, there is no valid reason to criticize the performance and efficiency of such industries.

In monopolistically competitive industries

	economic profits might be increased, but there will be productive inefficiency.
	economic profits might be diminished and there will be productive inefficiency.
	economic profits might be increased and there will be productive efficiency.
	economic profits might be diminished, but there will be productive efficiency.

b. “In the long run, monopolistic competition leads to a monopolistic price but not to monopolistic profits.”

This statement is

Answer 1

a) In monopolistically competitive industries,economic profits might be diminished but there will be productive efficiency.

Option(D)

b) In the long run,the price is set same as the monopolistic price but the profits are gone because in the long run more firms will enter the market as there is no barrier to entry and the P=ATC so that there is no profit and no loss

So,the statement is True because P>MC but the close substitutes will push the price down until it equals ATC