If firms in monopolistic competition are enjoying positive economic profits, in the long run
A)they will continue enjoying such profits, since new firms will be unable to enter the industry
B)consumers will cease wanting to buy such expensive goods and will switch to cheaper alternatives
C)this will attract new firms into the industry, causing prices to drop and profits to disappear
D)the government will have to step in and regulate the price

Question

Quizplus · Accepted Answer

In monopolistic competition, positive economic profits attract new firms into the industry, increasing competition, which leads to a decrease in prices and the elimination of economic profits over time.

If Firms in Monopolistic Competition Are Enjoying Positive Economic Profits