Why can a firm in monopolistic competition make an economic profit only in the short run?
What will be an ideal response?
A firm in monopolistic competition can make an economic profit only in the short-run because economic profit induces entry, which decreases the demand for the firm's product, lowers its profit-maximizing output, price, and economic profit. In long-run equilibrium, when entry ends, each firm makes zero economic profit.
Economics
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If the money supply is $250 billion and nominal GDP is $1 trillion, the velocity of money is:
a. 0.25. b. 0.40. c. 2.50. d. 4.00.
Economics
When firms enter a monopolistically competitive market: a. product variety diminishes
b. the demand curves of established firms shift to the right. c. prices fall. d. profits increase.
Economics