Why is it that a monopolistically competitive firm cannot earn positive economic profits in the long run?
What will be an ideal response?
A monopolistically competitive firm can earn positive economic profits only in the short run. In this case, other firms will enter the industry and produce substitutes for the existing firm's product so that its demand curve will become more elastic. Because of the increased competition in the long run, the existing firms' economic profits will disappear.
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The natural rate of unemployment is defined as the rate of unemployment that
A) exists only during periods of recession or depression in the economy. B) exists due to welfare and unemployment benefits that reduce potential workers' incentives to find work. C) prevails in long-run macroeconomic equilibrium, when all workers and employers have fully adjusted to any changes in the economy. D) prevails in the short-run macroeconomic equilibrium, before workers and employers have had a chance to adjust to an economic shock.
The maximum amount a rent seeker would pay for a monopoly is the ________
A) market price B) deadweight loss C) monopoly's economic profit D) monopoly's normal profit