Final answer:
Perfectly competitive firms face a perfectly elastic demand curve and can sell any quantity at the market price. They earn only normal profits in the long run due to new firms entering the market. Monopolistic competitors initially have more control over price but will ultimately earn zero economic profits in the long run as well.
Step-by-step explanation:
A perfectly competitive firm operates in a market where it is a price taker, meaning it must accept the market price for its products and cannot charge more. Such firms face a perfectly elastic demand curve, allowing them to sell any quantity at the same price. In the long-run, these firms earn only normal profits, also known as zero economic profits, because any short-term profits attract new firms into the market, increasing supply and driving down prices.
In contrast, a monopolistic competitor faces a downward-sloping demand curve and must choose the optimal combination of price and quantity to maximize profits. However, in the long-run, other firms will enter the market if the monopolistic competitor is earning substantial profits, leading to a decrease in demand for the original firm's products and a decrease in its profits. Ultimately, in the long-run equilibrium, firms in monopolistically competitive markets will also earn zero economic profits.