ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -Firms in monopolistic competition can leave the market easily in the long run. A differentiated oligopoly sells that differ across producers. An oligopoly is a market dominated by just a few firms. Firms in monopolistic competition never operate with excess capacity.

Detailed explanation-2: -In the long run in monopolistic competition any economic profits or losses will be eliminated by entry or by exit, leaving firms with zero economic profit. A monopolistically competitive industry will have some excess capacity; this may be viewed as the cost of the product diversity that this market structure produces.

Detailed explanation-3: -In the long-run, 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. As a result, this will make it impossible for the firm to make economic profit; it will only be able to break even.

Detailed explanation-4: -In the long-run, a monopolistically competitive market is inefficient. It achieves neither allocative nor productive efficiency.