Question

In the long period, a firm under monopolistic competition earns only ______________.

• A. normal profit
• B. abnormal profit
• C. supernormal profit
• D. none of the above

Answer 1

Answer: (A)

normal profit

A monopolistic market has multiple firms with highly differentiated products which can earn them super normal profits in the short run. However, the market is open to entry or exit of new firms which can bring out similar products in the long run and bring down the profits to normal levels.