Monopolistic Competitive firms in the long run earn a Positi

Monopolistic Competitive firms in the long run earn:

a. Positive economic profit

b. negative economic profits

c. none of the answers are correct

d. zero pure economic profits

Solution

D is the correct option. Zero pure economic profit. In monopolistic competition there is free entry and exit of firms. So if the firms earn positive profits, New firms enter the market and if the firm earn negative profits meaning loss the existing firms exit the market so this happens until the economic profit becomes zero