Monopolistically competitive firms can earn above-normal economic profits in the short run.

(a) In a few sentences, explain what will happen in the long run that will prevent monopolistically competitive firms from continuing to earn above-normal economic profits.

(b) What is different about monopolists and oligopolists that allows these firms to earn above-normal economic profits in the long run, when perfectly competitive and monopolistically competitive firms cannot? Explain your answer in a few sentences.

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a In the long run the entry of new firms into a monopolistically competitive ... View the full answer