In the long run, one of the characteristics of monopolistic competitive firms is that they...
ECONOMICS
JAMB 2009
In the long run, one of the characteristics of monopolistic competitive firms is that they
- A. make abnormal profits
- B. suffer losses
- C. make normal profits
- D. collude with each other
Correct Answer: B. suffer losses
Explanation
In the long run, monopolistic firms can freely enter and exits the market, firms can make decisions independently; there is some degree of market power; and buyers and sellers have imperfect information. The firms produce at a level where marginal cost and marginal revenue are equal. Companies in monopolistic competition will earn zero economic profit in the long run.
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