Which of the following statements about monopolistic competition is FALSE?
A) A firm can raise its product price by a small amount and lose, some but not all of its buyers, because of product differentiation.
B) A firm engages in nonprice competition as well as price competition.
C) A firm can earn an economic profit in the long run.
D) A firm faces a downward-sloping demand curve for its product.

Question

Quizplus · Accepted Answer

In monopolistic competition, firms can earn economic profits in the short run, but in the long run, the entry of new firms into the market erodes these profits, leading to a situation where firms can only earn normal profits.

Which of the Following Statements About Monopolistic Competition Is FALSE