Explain how long-run economic profits are linked to entry in monopolistic competition and perfect competition
What will be an ideal response?
In the short run, all market structures allow for positive economic profits. However, those profits can only be maintained in the long run if other firms cannot enter the industry. If they can they will enter and competition will force the price of the good down until economic profits are zero.
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On a graph of the consumption function, where the consumption function is below the 45 degree line, there is
A) zero disposable income. B) saving. C) maximum disposable income. D) no induced consumption. E) dissaving.
An asset's beta can be used to compute its discount rate for an NPV calculation because the discount rate is equal to
A) rf + b(rm + rf). B) rf - b(rm + rf). C) rf - b(rm - rf). D) rf + b(rm - rf). E) beta itself.