A monopoly firm can make economic profit in the long run. A firm ...

[123654777]

A monopoly firm can make economic profit in the long run. A firm in monopolistic competition cannot. What creates this difference?
 
  What will be an ideal response?

Question 2

Jane spends her monthly dining-out budget of 300.00 on either steak or lobster dinners. Using the above figure, what is the opportunity cost of a lobster dinner in terms of steak dinners?
 
  A) 0.5 steak dinners per lobster dinner
  B) 2.0 steak dinners per lobster dinner
  C) 5.0 steak dinners per lobster dinner
  D) 10.0 steak dinners per lobster dinner

[coreycathey]

Answer to Question 1

The key to long-run economic profits is a barrier to entry. The monopoly firm has a barrier to entry that protects its economic profit from the entry of new firms. A monopolistically competitive firm's industry features easy entry and exit and so there is nothing to protect any economic profit.

Answer to Question 2

B