Question

When monopolistically competitive firms advertise, in the long run they will still earn zero economic profit. they can earn positive economic profit by increasing market share. the market price must fall. the market price must rise.

Answer 1

In the long run they will still earn zero economic profit.

Step-by-step explanation:

Based on the scenario being discussed, when monopolistically competitive market advertise, can seen that, in the Long run, they will ear zero economic as it been known.

Monopolistic competition can be said to be an industry in which many firms manufacture products or services that have similarities, but is not perfect substitutes of the product. The firm still produces where marginal cost and marginal revenue still remain equal but the demand curve (MR and AR) has shifted as other firms come into the market and make competition to be increased. The company no longer sells its goods above average cost

, so there will earn zero economic profit.

Answer 2

When monopolistically competitive firms advertise, in the long run they will still earn zero economic profit.

Step-by-step explanation:

Monopolistic competition happens when many producers sell products that are differentiated from one another and hence are not perfect substitutes

Based on this, the demand curve of a firm in a monopolistic competitive market will shift so that it is tangent to the firm's average total cost curve and this will make it impossible for the firm to make economic profit. The best that can be expected is to be able to break even

This means in the long run, a monopolistically competitive firm will make zero economic profit.

A good example is Hotel which can only raise its prices without losing all of its customers based on brand loyalty and distinct quality differentiation.