Question

Monopolistically competitive firms experience economic profits in the long run that are:
eliminated due to firms leaving the industry.
eliminated due to firms entering the industry.
not eliminated because the competition is imperfect.
not eliminated because the demand curve is downward sloping.
not eliminated due to high barriers to entry to the industry.

Answer 1

Answer:

eliminated due to firms entering the industry

Explanation:

In the long run , monpolistically competitive firms earn zero economic profit due to entry of firms into the industry.

A monpolistically competitive firm has low barriers to entry and exit of firms. In the short run when monpolistically competitive firms earn economic profit, firms enter into the industry in the long run and economic profit would be wiped out.

Other features of monpolistically competitive firms are:

1. They sell differentiated products

2. They set the prices for their goods and services

3. They have a downward sloping demand curve.