A firm operating in a monopolistically competitive market can earn economic profits in
A)the short run but not in the long run.
B)the long run but not in the short run.
C)both the short run and the long run.
D)neither the short run nor the long run.

Question

Quizplus · Accepted Answer

A firm operating in a monopolistically competitive market can earn economic profits in the short run due to the ability to differentiate its products and charge a higher price. However, in the long run, new firms can enter the market, leading to increased competition and reduced profits. Eventually, economic profits will be zero in the long run as firms adjust their prices and output levels to reach the point of maximum efficiency.

A Firm Operating in a Monopolistically Competitive Market Can Earn