Why are firms in monopolistic competition unable to earn 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, they face the same problem other competitive firms face: freedom of entry. When firms in monopolistic competition are earning an economic profit, other firms will 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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States that restrict banks to having a single branch are said to require
A) mono banking. B) nonbank banking. C) unit banking. D) semi-banking.
In a closed economy, private saving is
a. the amount of income that households have left after paying for their taxes and consumption. b. the amount of income that businesses have left after paying for the factors of production. c. the amount of tax revenue that the government has left after paying for its spending. d. always equal to investment.