Why are firms in monopolistic competition unable to make an economic profit in the long run?
What will be an ideal response?
While firms in monopolistic competition do not produce an identical product, such as perfectly competitive firms do, they face the same problem other competitive firms face: freedom of entry. When firms in monopolistic competition are making an economic profit, other firms enter the market. Entry decreases the demand for the products of the existing firms and thereby decreases their economic profit. Firms will continue to enter the market until the economic profit equals zero.
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For a fixed proportion production function, at the vertex of any of the (L-shaped) isoquants the marginal productivity of either input is a. constant b. zero
c. negative. d. a value that cannot be determined.
According to Keynes's absolute income hypothesis, if Record Swap store manager Brenda Nielsen and pop singer Madonna were each given $1,000,
a. Madonna would likely spend less of the $1,000 on consumption than Brenda b. Madonna would likely spend more of the $1,000 on consumption than Brenda c. Madonna and Brenda would spend equal amounts of the $1,000 on consumption d. Madonna and Brenda would save equal amounts over their lifetimes e. Neither Madonna nor Brenda would save any of the $1,000