The monopolistic competitorA) may make a profit in the short run but not in the long run.B) may make a profit in the long run but not in the short run.C) may make a profit in both the short run and the long run.D) may make a profit in neither the short run nor the long run.

Question

Ashanti Robertson · Accepted Answer

Final Answer : A, Explanation :  Monopolistic competition involves firms with differentiated products, allowing them to have some pricing power. However, there are still many competitors in the market, leading to a downward-sloping demand curve but not as much market power as a monopoly. In the short run, a monopolistic competitor can make a profit by setting a price above their marginal cost. However, in the long run, other firms may enter the market or existing firms may expand their product differentiation, eroding the monopolistic competitor's market power and reducing profits to zero. Therefore, monopolistic competitors may make profits in the short run, but not necessarily in the long run.

The monopolistic competitor

A) may make a profit in the short run but not in the long run.
B) may make a profit in the long run but not in the short run.
C) may make a profit in both the short run and the long run.
D) may make a profit in neither the short run nor the long run.

Definitions

Learning Objectives

Learning Objectives

Related questions