Question

With easy entry and exit into the monopolistically competitive industry, short-run positive profits will not last long as...

Answer 1

In the long run, monopolistically competitive industries will not sustain positive profits due to easy entry and exit.

Step-by-step explanation:

In a monopolistically competitive industry, easy entry and exit make it difficult for firms to maintain positive profits in the long run.

If a firm is earning economic profits, this attracts new firms into the industry, increasing competition. With increased competition, prices and profits are driven down until they reach zero in the long run.

Similarly, if a firm is suffering economic losses, some firms may exit the industry. This decreases competition, allowing the remaining firms to increase prices and eventually reach zero economic losses in the long run.