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20 May, 09:27

1. In general, monopolistically competitive firms earn profits

A - higher than oligopolies

B - about the same as oligopolies

C - slightly above their costs in the long run

D - well above their costs in the long run

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Answers (2)
  1. 20 May, 12:05
    0
    C - slightly above their costs in the long run

    Explanation:

    Monopolistically competitive firm is the firm that produces at an output where average total cost is not a minimum ... In general, monopolistically competitive firms earn profits slightly above their cost in the long run.
  2. 20 May, 12:26
    0
    Among the options given on the question the correct answer is option C.

    Slightly above their costs in the long run.

    Explanation: The monopolistic competitive firms are those who produce the similar products and service but without perfect substitute. The monopolistic firms are closely related with the business strategy of brand differentiation. Basically, the monopolistic competition is the combine of monopoly and perfect market. The monopolistic competition don't have the the power to control the market price like the monopoly system.

    When the profit matter comes to the business, the monopolistic firms earn profits slightly above their costs in the long run. Because barriers to entry are low, other firms have an incentive to enter the market, increasing the competition. As a result to survive in the market the profit margin gets lower. Therefore, they just make the profit above their costs.
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