Asked by Selia Bennett on Apr 26, 2024
Verified
Refer to Figure 15.3. In the long run, this monopolistic competitive firm should expect
A) nothing to change; it will continue to make a profit.
B) firms to exit the industry and profits to increase.
C) firms to enter the industry until all economic profits are eliminated.
D) firms to enter the industry and profits to increase.
Monopolistic Competitive
A market structure characterized by many firms selling products that are similar but not identical, allowing for significant differentiation and some degree of market power.
Long Run
A period of time in which all factors of production and costs are variable, allowing companies to adjust all aspects of their operations.
Economic Profits
Economic profits are the financial gains that occur when the revenue from business activities exceeds the costs, expenses, and the opportunity costs of all resources employed.
- Acquire knowledge of how monopolistic competition affects market trends in the short and long term.
- Investigate the repercussions of firm entries and withdrawals on financial outcomes in the sector and on macroeconomic profitability.
Verified Answer
JN
Jaxon NaramoreApr 30, 2024
Final Answer :
C
Explanation :
In the long run, in a monopolistically competitive market, firms will enter the industry if existing firms are making economic profits. This entry will continue until the profits are eliminated, leading to a situation where firms earn only a normal profit.
Learning Objectives
- Acquire knowledge of how monopolistic competition affects market trends in the short and long term.
- Investigate the repercussions of firm entries and withdrawals on financial outcomes in the sector and on macroeconomic profitability.