Practice question · True or false
In monopolistic competition, firms earn large economic profits in the long run.
Hints
- Ask what free entry does to a visibly profitable niche.
- Differentiation buys short-run power, not permanent profit.
Show the answer
False
Why
Free entry does its work: profitable niches attract imitators until economic profit is competed toward zero. Differentiation buys short-run pricing power, not a permanent moat.
Practise Market Structures
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