question 18\nmonopolistically competitive firms earn normal long - run economic profit because they\na) use…

question 18\nmonopolistically competitive firms earn normal long - run economic profit because they\na) use socially optimal pricing\nb) set their prices equal to their marginal costs\nc) face low barriers to entry or exit\nd) face low revenues and high costs of production\ne) experience consistent diseconomies of scale

question 18\nmonopolistically competitive firms earn normal long - run economic profit because they\na) use socially optimal pricing\nb) set their prices equal to their marginal costs\nc) face low barriers to entry or exit\nd) face low revenues and high costs of production\ne) experience consistent diseconomies of scale

Answer

Brief Explanations:

In the long - run, monopolistically competitive firms earn normal economic profit because of low barriers to entry or exit. When firms are making economic profit in the short - run, new firms enter the market, increasing competition and reducing profit. When firms are making losses, some firms exit, reducing competition and increasing profit for the remaining firms. This process continues until firms earn normal economic profit.

Answer:

C. face low barriers to entry or exit