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Monopoly vs. Monopolistic Competition in the Long Run

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What are the long-run effects on prices, output, and profits in monopolistic and monopolistically competitive industries?

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Solution Summary

Why monopolists can earn a long-run economic profit but monopolistic competitors can't, and a list of factors that could erode a monopolist's market power.

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See the attached file. In the short run, a monopolistically competitive firm can earn an economic profit, represented by the area of the rectangle whose width is the distance between its Average Revenue curve (demand curve) and its Average Cost curve. However, one of the characteristics of a monopolistically competitive market is ease of entry. New firms ...

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