Asked by Silvia Montañes Sintes on Apr 24, 2024
Verified
If monopolistically competitive firms are earning positive economic profits in the short run,then in the long run:
A) firms will leave the industry.
B) the demand curves faced by existing firms will move to the right.
C) economic profits will increase.
D) economic profits will be reduced to zero.
Positive Economic Profits
Earnings that exceed the total costs, including both explicit and implicit costs, signalling strong market performance.
Monopolistically Competitive
Monopolistically competitive refers to a market structure where many firms sell similar but not identical products, with each firm having some degree of market power.
Short Run
A time period in which at least one factor of production is fixed, focusing on immediate effects.
- Illustrate how the introduction and departure of businesses shape the market framework and affect the economic earnings of separate firms in a monopolistically competitive environment.
Verified Answer
Learning Objectives
- Illustrate how the introduction and departure of businesses shape the market framework and affect the economic earnings of separate firms in a monopolistically competitive environment.
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