Final answer:
Monopolies can maintain long-run economic profits due to high barriers to entry and lack of substitutes, which is not possible in perfect or monopolistic competition where ease of entry and product differentiation lead to zero economic profit as firms enter or exit the market until profits are normalized.
Step-by-step explanation:
The reason monopolies can sustain long-run economic profit, as opposed to perfect competition or monopolistic competition, lies in the barriers to entry and the lack of substitutes for their products. Monopolies have unique advantages which prevent other firms from entering the market and competing away profits. In contrast, if firms in a monopolistically competitive industry are earning economic profits, it will attract new entrants, increasing the competition and thereby driving profits down to zero in the long run. Similarly, perfect competition results in zero economic profit in the long run because any firm making excess profits will attract immediate competition due to the ease of entry, and product homogeneity ensures that consumers can easily switch between suppliers.
Monopolistic competition, though allowing for short-term profits due to differentiated products, still sees the entry and exit of firms in the long run, adjusting the market until economic profits are zero. This occurs because as profits are made, it signals new entrants that there is opportunity, which increases supply and reduces prices until profits are normalized. If losses are incurred, firms exit the market, reducing supply and increasing prices until losses are minimized and eliminate. Perfect competition also operates under a zero economic profit in the long run, although it is characterized by complete efficiency and a lack of variety in the market, unlike monopolistic competition.