I am confused on the differences in how these types of firms make profits. How is a monopolistically competitive firm like a monopoly, and how is it like perfect competition?
Why doesn't the monopolistically competitive firm, enjoy long-run economic profits like the oligopoly and monopoly since they all 3 have downward-sloping demand curves?
Can the monopolistically competitive firm achieve long-run economic profits, and if so or not, why?
>How is a monopolistically competitive firm like a monopoly?
Like a monopoly it has a downward-sloping demand curve, meaning that it has some power to set its own price. A monopolistically competitive firm's market power derives from the differentiation of its product from its competitors'.
>and how is it like ...
Solution Summary
This solution explains the differences between the 4 types of market: monopolistic competition, monopoly, oligopoly, and perfect competition. It explains why a monopolistic competitor cannot enjoy long-run economic profits like a monopolist or an oligopolist.
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