Question

Check all of the following market structures that experience no economic profit in the long run.

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoy

Answer 1

1.

Since in the long-run perfectly competitive firm profit-maximising condition are;

P=LRMC=LRAC

Hence firm earn zero economic profit.

2.

Since in the long-run Monopolistically competitive firm profit-maximising condition are;

MR=MC

Price is greater than AC, therefore there will be economic profit.

3.

Since in the long-run Monopoly firm profit-maximising condition are;

MR=LRMC=SRMC

Price is greater than AC, therefore there will be economic profit.

4.

Since in oligopoly, there is few largest firm who control whole market, so in the long-run there is restriction of new firm entry. Therefore firm earns economic profit in the long-run.

Hence it can be said that in the long-run only perfectly competitive firm earns zero-economic profits.

Hence option first is the correct answer