In general monopolistically competitive firms earns profits?

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2026-04-07 09:00

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In the short run, monopolistically competitive firms can earn profits due to their ability to differentiate their products and have some degree of market power. This differentiation allows them to set prices above marginal costs. However, in the long run, the presence of new entrants attracted by these profits typically leads to increased competition, which erodes those profits. Ultimately, firms in monopolistically competitive markets tend to earn zero economic profit in the long run, as prices adjust to equal average costs.

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