Final answer:
Both perfect competition and monopolistic competition result in zero economic profits in the long run due to the entry and exit of firms, but they differ in productive and allocative efficiency with monopolistic competitors not being as efficient due to lack of least-cost production and non-price equaling marginal cost.
Step-by-step explanation:
Perfect competition and monopolistic competition are similar in that, under both market structures, there are zero economic profits in the long run. This occurs because in both cases entry and exit of firms in the market ensure that firms can only make normal profits; any supernormal profits would attract new entrants until profits are driven down to zero, and any losses would cause firms to exit the market.
However, there are differences between the two market structures. In perfect competition, firms produce at the least-cost combination and price equals marginal cost, which leads to productive and allocative efficiency. In contrast, monopolistic competitors do not always produce at the minimum of average cost nor do they set price equal to marginal cost, leading to a lack of productive and allocative efficiency in the long run. Unlike perfect competition, monopolistic competition involves product differentiation, leading to a variety in the market.