Can positive economic profits persist under monopolistic competition in the long run. Why?
What will be an ideal response?
No, because economic profits will entice new firms to enter the market. When more firms enter the market, each firm’s demand curve will shift downward. The demand curve and hence also the MR curve will be pushed down so far by the entry of new rivals that when the firm equates MC and MR in an attempt to maximize profits, it simultaneously equates price (P) and average cost (AC) so that economic profits are zero.
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If the exchange rate changes from 1.5 euros per dollar to 1.0 euro per dollar, the euro has
A) depreciated against the dollar. B) appreciated against the dollar. C) fallen inversely in value. D) depreciated against the euro. E) appreciated against the euro.
Which of the following is an example of a barrier to entry?
a. Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. b. Mark charges a lower price to students than to faculty for his tattoo services. c. Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. d. John obtained a copyright for the song he wrote and recorded.