alleryStart learning →New firms enter a monopolistically competitive market when existing firms earn:
ASuper-normal profits
BNormal profits only
CPersistent losses
DEconomic losses
Answer & Solution
Correct answer: A. Super-normal profits
Super-normal profits attract entrants, who raise supply and cut price until only normal profit remains.
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Related questions
Critics say the perfect competition model wrongly shows all agents as:The equilibrium price of a perfectly competitive market is fixed where:Which markets come closest to perfect competition in practice?Which economic theorem says competitive equilibria are Pareto-efficient?In the short run, perfectly competitive firms are:A firm sells 200 units at Rs 50 each, with average cost of Rs 42 per unit. Its economic prNormal profit is treated by economists as a component of:What attracts new firms into a perfectly competitive industry?