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Why monopolistic competition in the short run making profit but in long run it would be break even?
Wiki User
∙ 14y ago
In the short run a monopolistic firm can charge where MR=MC and that will be at a price that gains abnormal profits. They can do this in the short run because firms have a lag before they can be set up. But in the long run, the abnormal profits draw new firms into the industry and so this forces the firm to break even. Any profit at all- in theory- will draw in competitiors as there are limited barriers to entry.
Wiki User
∙ 14y ago
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