A monopoly firm can make economic profit in the long run. A firm in monopolistic competition cannot. What creates this difference?
What will be an ideal response?
The key to long-run economic profits is a barrier to entry. The monopoly firm has a barrier to entry that protects its economic profit from the entry of new firms. A monopolistically competitive firm's industry features easy entry and exit and so there is nothing to protect any economic profit.
You might also like to view...
The final consumer demand for chicken (normal good) in China will shift to the left if
A. consumer income decreases. B. fewer consumers are present in the market. C. the price of chicken decreases. D. Either A or B occurs.
Many economists believe that at the current level of consumption of health care in the United States, the marginal cost of health care for society is:
A. Less than the marginal benefit B. Greater than the marginal benefit C. Equal to the marginal benefit D. Zero