Why is it that firms can earn profits in the long run in monopoly and oligopoly but not in monopolistic competition and perfect competition?

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1106638

2026-03-09 22:45

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Because monopolistically competitive firms have an optimal production allocation at monopoly values: marginal revenue = marginal cost, marking-up to the demand function. When competition is not perfect, marginal revenue does not equal demand but is always below it on a Cartesian plane, so the optimal production value of a monopolistically competitive firm is both less and at a higher price than a perfectly competitive one.

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