How do we correctly understand the claim that firms in perfect and also monopolistic competition would...

How do we correctly understand the claim that firms in perfect and also monopolistic competition would make zero profit in the long run?

Expert Solution

Every seller has the freedom to enter the market both in the perfect competition and monopolistic competition. A firm can earn positive economic profits in the short run as firms are not in a position to enter the market. But, in the long run, any positive economic profits induces new firms to enter the market. It increases the total supply and reduces the market price. This trend continues till profits are reduced to zero.

Rahul Sunny answered 2 years ago

What sets monopolistic competition apart from perfect competition or oligopoly? In what ways do firms in...

What sets monopolistic competition apart from perfect competition or oligopoly? In what ways do firms in monopolistic competition behave as those in perfect competition and in what ways do they behave as firms in oligopolies or monopolies? Identify a product or service you purchase where sellers fit the definition of monopolistic competition? What is the size of the seller? Is the seller earning high profits or a normal return on investment? Does the seller use non-price competition? If so, which...

4. Perfect competition vs. monopolistic competition: (a) What is the difference between perfect competition and monopolistic...

4. Perfect competition vs. monopolistic competition: (a) What is the difference between perfect competition and monopolistic competition? (b) Suppose the only long-run adjustment is free entry or exit of firms. What is the difference between the short-run equilibrium conditions faced by a perfectly competitive firm and a monopolistically competitive firm? How about the long-run equilibrium conditions?

The demand curve facing individual firms is _in monopolistic competition and ____ in perfect competition. Group...

The demand curve facing individual firms is ___________in monopolistic competition and __________ in perfect competition. Group of answer choices A) downward sloping; horizontal B) horizontal ; downward sloping C) downward sloping; downward sloping D) vertical; horizontal

The major difference between monopolistic competition and perfect competition is that firms produce differentiated products in...

The major difference between monopolistic competition and perfect competition is that firms produce differentiated products in the former and homogeneous products in the latter. How does product differentiation generate the differences between the two models?

Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect...

Explain monopolistic competition. How is it similar to perfect competition? How does it differ from perfect competition?

Problem 3: a. How does monopolistic competition differ from perfect competition? b. If monopolistically competitive firms...

Problem 3: a. How does monopolistic competition differ from perfect competition? b. If monopolistically competitive firms are making economic profits in the short run? What happens in the long run?

Contrast the considerations of firms in Monopolistic competition and Perfect Cometition as they set price and...

Contrast the considerations of firms in Monopolistic competition and Perfect Cometition as they set price and quantity to maximize profits. Markets

1. In both perfect competition and monopolistic competition, in the long run typical firms earn zero...

1. In both perfect competition and monopolistic competition, in the long run typical firms earn zero economic profit. Which of the market characteristics is most responsible for this zero economic profit? There are many buyers and sellers in these markets. There is no government control of price in these market. Identical (homogeneous) products are sold in these markets. Differentiated products are sold in these markets. There are no significant barriers to entry to these markets. 2. If a firm in...

1. Three market structures: perfect competition, monopoly, and monopolistic competition. – In each of these, would...

1. Three market structures: perfect competition, monopoly, and monopolistic competition. – In each of these, would you expect to see firms spending money to advertise their products? Why or why not? 2. Is advertising good or bad from society’s viewpoint? Try to think of at least one “pro” and “con.

A characteristic that distinguishes monopolistic competition from perfect competition is:

QUESTION 1A characteristic that distinguishes monopolistic competition from perfect competition is:no long-run economic profits.no barriers to market entry or exit.differentiated products.many buyers and sellers.QUESTION 2A firm in a perfectly competitive industry is maximizing its profits at 400 units. If the marginal revenue and marginal cost are each $35 and the firm's average total cost is $25, this firm's profit is:$0.$10.$4,000.$14,000.QUESTION 3A perfectly competitive firm shuts down in the short run when:economic losses occur.the price is below the average total cost...

Question