Which statement concerning monopolistic competition is false?
A) In the long run P = AC MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products,but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run since barriers to entry are significant.

Question

Which statement concerning monopolistic competition is false?
A) In the long run P = AC > MC.
B) Firms may experience losses in the short run.
C) Firms differentiate their products,but the products are relatively substitutable.
D) Firms may experience positive economic profits in the long run since barriers to entry are significant.

Quizplus · Accepted Answer

The statement that firms may experience positive economic profits in the long run since barriers to entry are significant is false. In the long run, economic profits will attract new firms to enter the market, leading to increased competition and reducing economic profits to zero. Therefore, in the long run, firms in monopolistic competition will operate at a level where P = AC > MC, but will not experience positive economic profits.

Which Statement Concerning Monopolistic Competition Is False