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Is It True That in the Long Run,a Monopolistically Competitive

question 78

Essay

Is it true that in the long run,a monopolistically competitive firm has market power but earns no profit? Explain.


Definitions:

Relatively Inelastic

Describes a situation where the demand for a good or service changes by a smaller percentage than changes in its price.

Deadweight Loss

A situation where inefficiency in the market leads to a loss of total social welfare, typified by a gap between the supply and demand curves.

Relatively Elastic

Describes a situation where the demand or supply for a good or service significantly changes in response to changes in price.

Elastic Supply

A situation in which the supply of a good or service changes significantly in response to changes in price.

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