For an individual firm operating in a monopolistically competitive industry, the firm ______ earn short-run economic profits and ________ earn long-run economic profits.

Question

BlackTom AI · Accepted Answer

Starting with the basic concept: in a monopolistically competitive industry, firms face downward-sloping demand due to product differentiation, and there are relatively easy entry and exit.
Option 1: "can; can." This claims firms can earn short-run profits and can also earn long-run profits. In the short run, if a firm has a favorable demand curve or cost structure, it may earn economic profits. However, the long-run reality is that free entry erodes those profits as new firms enter and drive down demand faced by each existing firm, pushing profits toward zero economic profit (normal profit). Therefore this option misstates the long-run outcome.
Option 2: "cannot; cannot" Suggests that firms neither earn short-run nor long-run profits. While long-run profits are typically zero due to entry, it is possible to earn positive profits in the short run before entry adjusts. Thus this option incorrectly denies short-run profits altogether.
Option 3: "can; cannot" This aligns with the standard teaching: short-run economic profits may be earned due to the downward-sloping demand and particular cost structures, but in the long run, entry eliminates these profits, resulting in zero economic profit. This option captures both parts correctly.
Option 4: "cannot; can" States that firms cannot earn short-run profits but can in the long run. This conflicts with the mechanism of entry and the potential for short-run deviations above zero profit; it misrepresents the possibility of temporary gains before entry.
In sum, the only option that reflects the typical short-run profit possibility and the long-run erosion of profits in monopolistic competition is the one that says firms can earn short-run profits but cannot earn long-run profits.

For an individual firm operating in a monopolistically competitive industry, the firm earn short-run economic profits and __ earn long-run economic profits.单项选择题

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For an individual firm operating in a monopolistically competitive industry, the firm ______ earn short-run economic profits and ________ earn long-run economic profits.单项选择题

类似问题

In a market with________, many firms are providing differentiated products.

Which of the following products is least likely to be sold in a monopolistically competitive market?

Which of the following is true of a monopolisti-cally competitive firm in long-run equilibrium?

The diagram below shows the marginal cost (MC), average cost (AC), and demand curve faced by a representative firm in a monopolistically competitive market. Which one of the following statements is TRUE?

The diagram below shows the marginal cost (MC), average cost (AC), and demand curve faced by a representative firm in a monopolistically competitive market. Which one of the following statements is TRUE?

2. In the short-run, a profit-maximizing monopolistically competitive firm sets it price: A. equal to marginal revenue. B. equal to marginal cost. C. above marginal cost. D. below marginal cost.

19 A firm in a monopolistically competitive market that does not continue to innovate is likely to: A. become more efficient B. earn a normal profit C. earn positive economic profits D. see its demand curve become more inelastic

Unlike a firm in a perfectly competitive market, a firm in a monopolistically competitive market: A. can charge a price higher than ATC in the long run B. can charge a price higher than MC in the long run C. is not constrained by the demand curve, only by MR D. makes a normal profit in the long run

更多留学生实用工具

希望你的学习变得更简单

For an individual firm operating in a monopolistically competitive industry, the firm earn short-run economic profits and __ earn long-run economic profits.单项选择题