This is the second time I post the same question! SO PLEASE I NEED THIS COMPUTER

Question

This is the second time I post the same question! SO PLEASE I NEED THIS COMPUTER TYPED SO I CAN READ IT!!! (I don’t want the that already on Chegg) , MUST provide the answer with an economic explanation (please explain as much as you can)... thanks!

Your textbook states that, in the long run, representative firms in monopolistically competitive markets will just break even --- that is, earn zero economic profits. Yet some firms in highly competitive markets manage to continue to earn economic profits indefinitely. For example, perfumes, cosmetics, and hair care firm L’Oreal, in business since 1907, remains highly profitable today, despite competing in fiercely competitive product categories. How has L’Oreal managed to stay profitable for so long (clue: they have a research and development staff of over 1000 people).

Explanation / Answer

Some firms in the monopolistic competition, maintain to earn economic profit for an indefinite period of time and it is exemplified by the companies like L’Oreal. It has happened, because the company has investment huge amount of funds in R&D work that has helped the company to come up with new products to suit the current trends and preferences in the market. It makes the company to always achieve a boosted sales, because at every regular interval, new product comes into the market and become popular. Once the one product moves into the maturity stage of the PLC, another new product is launched. It happens in different consumer segments in terms of quality, price as well as specific consumer needs. It also helps the company to maintain the exclusivity in the product and always move ahead of the competitors who try to copy the big brands. Hence, it is the company’s strategy to regularly come up with new products in each target segment, matching with the customer’s demand and latest trends & preferences, that helps to keep them growing and earn economic profit. It causes rival smaller firms to be unable to reach to the level of companies like L’Oreal in the market.
So, it is more of a conceptual thing that monopolistic firms, don’t earn economic profit indefinitely. It happens when there is an assumption that companies don’t change their products and remain in the market with the same product portfolio. But, it does not happen in real world scenarios.

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