Final answer:
In long-run equilibrium, a monopolistically competitive firm will have zero economic profit because the entry of new firms will drive down profits until price equals average cost.
Step-by-step explanation:
For a monopolistically competitive firm in long-run equilibrium, the correct statement is that economic profit is zero. This occurs because new firms will enter the market if the existing firm earns positive economic profits, leading to a reduction in the original firm's demand and marginal revenue curves. Eventually, in long-run equilibrium, the firm's demand curve will touch the average total cost curve at a point where price is equal to average cost, and thus, economic profits will be driven down to zero. It's important to note that zero economic profit does not mean the firm is not making money; it simply means that the firm's accounting profit is equal to what the firm could earn in its next best alternative.
In the case of a firm initially operating at a loss, the adjustment process involves firms exiting the market until the remaining firm's demand curve touches the average cost curve, eliminating economic losses. At this point, price will again be equal to average cost, and therefore, the firm will be making zero economic profits.