Question

Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why

Which of the three industries (perfect competition, monopolistic competition, monopoly) can sustain long-run economic profit? Why

Homework Answers

Answer #1
  • Out of the three industries, a monopolistically competitive market can sustain long run Economic profits.
  • A monopolistically competitive market is a market structure in which many firms sell differentiated products which are not the substitutes of other goods sold by other firms.
  • The firms belonging to this market can sustain long run Economic profits, as they decide the quantity of output they wish to sell and set the price at which they wish to supply their goods.
  • Their pricing and quantity supplied decisions are independent of other firms in the market.
  • This will increase the profits they earn in long run and attract other firms into the market.
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