Why Does a Firm in Monopolistic Competition Make Zero Economic

question 52

Essay

Why does a firm in monopolistic competition make zero economic profit rather than an economic profit in the long run?

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Definitions:

Non-Controlling Interest

A ownership stake in a corporation where the holding gives the investor less than 50% voting power.

Intercompany Profits

Profits derived from transactions between companies within the same group, which may need to be eliminated in consolidated financial statements.

Goodwill

An intangible asset that arises when a business is acquired for more than the fair value of its identifiable net assets; reflects the value of the brand, customer relationships, and reputation.

Parent-Company Extension Method

This method involves the accounting for investments in subsidiaries from the perspective of the parent company, focusing on the extension of the parent company's financial statements to include its interest in subsidiaries.