Final answer:
A firm earning monopoly profits maintains such profits through barriers to entry that prevent new competitors from entering the market. These barriers can be legal, technological, or market-based and can be as varied as control over resources to legal measures like patents. Monopolistic competition differs in having many competitors and low barriers to entry.
Step-by-step explanation:
A firm earning monopoly profits is able to maintain those profits if there are barriers to entry that prevent new firms from entering the industry. Barriers to entry are various legal, technological, or market forces that make it difficult or impossible for newcomers to enter an existing market and compete with incumbents. These can include things like economies of scale, stringent regulations, control over essential resources, or significant startup costs. For example, a natural monopoly may occur when a single firm can supply the entire market at a lower cost than any potential competitor, often due to economies of scale.
Additionally, legal protections such as patents, copyrights, and trademarks can prevent new competitors from offering similar products or services. Even aggressive tactics like predatory pricing can act as a barrier by intentionally undercutting prices to discourage or drive out competitors. In contrast, markets characterized by Monopolistic competition have low barriers to entry and many firms compete by selling differentiated products.