This Question: 1 pt 2 of 10 (3 complete When a firm in a monopolistically compet

Question

This Question: 1 pt 2 of 10 (3 complete When a firm in a monopolistically competitive market is making an economic profit. 0 A, we expect firms to enter in the long run only if they have zero markup OB. we don't expect firms to enter the market because increased competition will eliminate excess capacity O Ci we expect firms to enter the market in the long run O D. we expect firms to enter the market in the long run only if new firms will have excess capacity Q E. we don't expect firms to enter the market in the long run because of barriers to entry to select your answer

Explanation / Answer

First question is answered below

1. Correct option: (c)

Reason: Monopolistically competitive firms operate for profit maximization. They earn positive economic profits in the short run. However, due to free entry and exit, firms will enter the market so as to make profits too, thereby bringing down profits to zero in the long run.

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