Answer:
D. In monopolistic competition, profits well in excess of costs are unlikely because established rivals and new firms would lure customers away with slightly different and/or cheaper products.
Step-by-step explanation:
In monopolistic competition, firms have some degree of market power due to product differentiation, which allows them to charge a slightly higher price than their competitors. However, this market power is limited by the presence of close substitutes, as customers can switch to other products if the price is too high or if they perceive that the substitute products offer a better value for their money.
Therefore, firms in monopolistic competition cannot earn profits well over their costs in the long run. New firms can enter the market and offer slightly different products or lower prices, attracting some of the established customers. This competition among the firms keeps the price and profit margins in check. As a result, established firms must keep innovating and improving their products to maintain their market position and profitability.