A firm in monopolistic competition may earn economic profit in the short run mainly because:
Correct answer: A. Its product is differentiated from competing products
- A. Its product is differentiated from competing products
- B. The government fixes its selling price
- C. It faces no potential competitors
- D. Its marginal cost is permanently zero
Explanation
Product differentiation gives a firm some control over its price and can attract loyal customers, allowing short-run economic profit. In the long run, entry of competing firms generally reduces that profit.
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About Microeconomics
Individual consumers, firms and markets are examined through demand and supply, elasticity, consumer choice, production, costs, revenue and the determination of prices and output. The topic also covers market structures such as perfect competition, monopoly and oligopoly, plus market failure, externalities and the distinction between microeconomic decisions and economy-wide outcomes.
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