Final answer:
In the long run, a monopolistically competitive firm will earn normal profit due to competition and market adjustments. In the long run, a monopolistically competitive firm will earn normal profit due to the accessibility of the market for new competitors which decreases demand and price for existing firms until only normal profits are achieved.
Step-by-step explanation:
In the long run, a monopolistically competitive firm will earn normal profit. Unlike a monopoly, a monopolistically competitive firm with positive economic profits will attract competition, causing the demand and marginal revenue curves to shift. As new competitors enter the market, the original firm's profit-maximizing price and level of output decrease, eventually leading to zero economic profits for all firms in the long-run equilibrium.
In the long run, a monopolistically competitive firm will earn normal profit due to the accessibility of the market for new competitors which decreases demand and price for existing firms until only normal profits are achieved.
In the long run, a monopolistically competitive firm will earn normal profit, which is also referred to as zero economic profit. This outcome occurs because unlike a monopoly, which has high barriers to entry, a monopolistically competitive firm with positive economic profits will attract new competitors into the market. As new firms enter, the original firm's demand curve and associated marginal revenue curve shift left, leading to decreased demand and profit-maximizing price for the original firm, until only normal profits are possible.
Consequently, the presence of continued positive economic profits in a monopolistically competitive market is unsustainable in the long run. Entry and exit in the market will drive firms toward a position where they break even, earning just enough to cover their costs, including the opportunity cost of capital, which is the definition of normal profit. Unlike perfect competition, where firms also earn zero economic profits in the long run, monopolistic competition can result in a variety of outcomes concerning efficiency and market variety.