Question

Which of the following type of businesses earn zero profits in the long-run market equilibrium? Oligopolists...

Which of the following type of businesses earn zero profits in the long-run market equilibrium?

Oligopolists and monopolistically competitive firms.

Perfectly competitive firms and monopolists.

Perfectly competitive firms and monopolistically competitive firms.

Monopolists and oligopolists

Homework Answers

Answer #1

Answer - Perfectly competitive firms and monopolistically competitive firms.

The firms under a perfect competition market and monopolistic competition will earn zero economic profit in the long run. In the long run, the firms under both the markets earns only normal profits (AR=AC).

In the long run the firm under perfect competition market and monopolistic competition market gets normal profits and zero economic profit just to restrict the entry of new firms into the market. If new firms enters into the market, the price will further decrease. So, to stop the entry of new firms they settle at a price where the price equals average cost and it offers no incentive for a new firm to enter into the market.

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