Question

If rock music is declining in popularity in monopolistic , then there will be:

Question 34 options:

	1) economic losses in both the short and long run.
	2) economic losses in the short run, but zero economic profits in the long run.
	3) economic losses in the short run, but in the long run, there be positive economic profits.
	4) economic profits in both the short and long run.

Answer 1

A Monopolistically competitive firm

Since a monopolistic firm is that form of market in which there is large number of buyers and sellers and firm sells differentiated product based on quality, size, shape etc, therefore product is not homogeneous. Since firm is price maker but firm does not compete on the price but they compete in the market based on size, quantity quality etc.

Monopolistically competitive firm

a. Large number of buyers and sellers

b. Free entry and exit

c. In the long-run zero economic profit

Long-run profit-maximizing condition is

MR=MC

And Price and ATC will be equal.

Since the rock music is declining in popularity in monopolistic, then it means demand for rock music decreasing. Hence in the short-run there will be economic loss but due to economic loss in the short-run some firm will exit and in the long-run existing firm earns zero economic profit.

Hence it can be said that if rock music is declining in popularity in monopolistic, then there will be economic losses in the short run, but zero economic profits in the long run.

Hence option 2 is the correct answer.