Asked by
Daniel Bogale
on Nov 16, 2024
Verified
In monopolistically competitive markets, free entry and exit suggests that
A) the market structure will eventually be characterized by perfect competition in the long run.
B) all firms earn zero economic profits in the long run.
C) some firms will be able to earn economic profits in the long run.
D) some firms will be forced to incur economic losses in the long run.
Economic Profits
Earnings that exceed the opportunity costs of all resources used by a firm, often considered as profits above normal profits.
Free Entry
A market condition where firms can freely enter or exit the industry without facing significant barriers.
Competitive Markets
Competitive markets are characterized by many buyers and sellers, allowing for free and open competition which dictates prices and quality of goods and services.
- Examine the consequences of barrier-free entry and exit in markets characterized by monopolistic competition on the economic gains.
Verified Answer
MB
Learning Objectives
- Examine the consequences of barrier-free entry and exit in markets characterized by monopolistic competition on the economic gains.