Question

In the long run equilibrium, the economic profits earned by a monopolistically competitive firm will be...

In the long run equilibrium, the economic profits earned by a monopolistically competitive firm will be zero.

true or false.

Homework Answers

Answer #1

Ans. True

Monopolistic competitive firm can earn economic profit only in the short run as it sets the price where marginal revenue equals to marginal cost. This pricing policy leads to the fall in demand for its good in the long run and more firm enter the market and differentiate it's goods which will increase the cost. Demand will fall and cost will rise until price equals to the average cost curve where monopolistic competitive firms have two outcome:

1) at this level, the firm will have excess capacity of production

2) at this level, the firm will have zero economic profit or normal economic profit.

Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
In long run equilibrium, monopolistically competitive firms experience ______ economic profits. A positive B zero C...
In long run equilibrium, monopolistically competitive firms experience ______ economic profits. A positive B zero C negative D can not be determined
In the long run, monopolistically competitive firms tend to have: high economic profits. substantial economic losses....
In the long run, monopolistically competitive firms tend to have: high economic profits. substantial economic losses. zero economic profits. negative economic profits.
In monopolistically competitive industries, economic profits are competed away in the long run; hence, there is...
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...
The force that leads to zero economic profits for monopolistically competitive firms in the long run...
The force that leads to zero economic profits for monopolistically competitive firms in the long run is A.  excess capacity. B.  price wars among firms. C.  entry by new firms. D.  excessive advertising.
When a monopolistically competitive firm is in a long-run equilibrium, the values of average revenue, average...
When a monopolistically competitive firm is in a long-run equilibrium, the values of average revenue, average total cost, and price are all the same. Select one: True False
For monopolistically competitive firms is it always likely in the long-run to have zero-economic profit? Monopolistically...
For monopolistically competitive firms is it always likely in the long-run to have zero-economic profit? Monopolistically competitive firms in the long-run
1. For a firm in a perfectly competitive industry, short-run and long-run economic profits must be...
1. For a firm in a perfectly competitive industry, short-run and long-run economic profits must be zero. short-run economic profits must be zero. both short-run and long-run economic profits may be negative. short-run economic profits may be positive, but long-run economic profits must be zero. 2. At a market clearing price, the quantity demanded will just equal the quantity supplied. the demand function will shift outward. there will be a tendency for price to rise over time. there will be...
Which firms typically have zero economic profits in the long run? options: A) monopolist, perfectly competitive...
Which firms typically have zero economic profits in the long run? options: A) monopolist, perfectly competitive B) perfectly competitive, monopolistically competitive C) oligopolist, monopolistically competitive D) perfectly competitive, oligopolist
What are economic profits? Does a firm in a competitive industry earn long-run economic profits? Explain.
What are economic profits? Does a firm in a competitive industry earn long-run economic profits? Explain.
In the long run equilibrium for a monopolistically competitive firm, Group of answer choices P =...
In the long run equilibrium for a monopolistically competitive firm, Group of answer choices P = MC P = ATC, and the firm will be at the minimum of the ATC curve P = ATC, but the firm will not be at the minimum of the ATC curve P < MC