Final answer:
Small 'Mom and Pop' businesses may continue operating without economic profits due to non-monetary satisfaction, low overhead costs, fulfilling community needs, and resilience during economic downturns. Differentiation, such as offering unique products, can also aid in their success.
Step-by-step explanation:
Small “Mom and Pop firms” such as inner city grocery stores can continue to operate even if they do not earn economic profits due to a variety of factors. Firstly, these businesses often fulfill a community need by providing essential goods and services in areas that may be underserved by larger retailers. Additionally, owners of these firms may derive a non-monetary satisfaction from their business, such as a sense of community contribution or personal fulfillment, that compensates for the lack of economic profit.
Furthermore, many of these businesses own the property and do not have high mortgage or rental costs, which helps to keep overhead low and allows operation despite slim profit margins. Finally, during times of economic downturn, as seen during the pandemic, these businesses often display resilience due to their small size and adaptability, allowing them to weather periods of reduced revenue more effectively than larger businesses.
Economic success for businesses can also depend on their ability to differentiate themselves, as shown by the Authentic Chinese Pizza store example. Serving a unique product like pizza with sweet and sour sauce allows this monopolistic competitor to establish a niche in the market. Even though they are not a monopoly, the differentiated product gives them a downward sloping perceived demand curve, indicating they have some control over their pricing, helping them to stay competitive and possibly profitable even when facing competition.