Author Question: Why are firms in monopolistic competition unable to earn an economic profit in the long run? What ... (Read 109 times)

khang

  • Hero Member
  • *****
  • Posts: 569
Why are firms in monopolistic competition unable to earn an economic profit in the long run?
 
  What will be an ideal response?

Question 2

In a market with asymmetric information, ________.
 
  A) buyers tend to forget relevant information about the good being traded
  B) buyers set the price of the good being traded
  C) buyers and sellers have different information about the good being traded
  D) buyers have very low bargaining power



coreycathey

  • Sr. Member
  • ****
  • Posts: 333
Answer to Question 1

While firms in monopolistic competition do not produce an identical product, such as perfectly competitive firms, they face the same problem other competitive firms face: freedom of entry. When firms in monopolistic competition are earning an economic profit, other firms will enter the market. Entry decreases the demand for the products of the existing firms and thereby decreases their economic profit. Firms will continue to enter the market until the economic profit equals zero.

Answer to Question 2

C



Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
 

Did you know?

Many of the drugs used by neuroscientists are derived from toxic plants and venomous animals (such as snakes, spiders, snails, and puffer fish).

Did you know?

Patients should never assume they are being given the appropriate drugs. They should make sure they know which drugs are being prescribed, and always double-check that the drugs received match the prescription.

Did you know?

In Eastern Europe and Russia, interferon is administered intranasally in varied doses for the common cold and influenza. It is claimed that this treatment can lower the risk of infection by as much as 60–70%.

Did you know?

Increased intake of vitamin D has been shown to reduce fractures up to 25% in older people.

Did you know?

In 2010, opiate painkllers, such as morphine, OxyContin®, and Vicodin®, were tied to almost 60% of drug overdose deaths.

For a complete list of videos, visit our video library