Question

Is an oligopolist more likely to earn an above-normal profit in the long-run compared to a monopolistic competitive firm? Explain why or why not?

Answer 1

For a monopolistic competition there is a free entry and exit in the market, as the firm makes a super normal profit, it will attract more and more firms in the market. That will continue to the point where the profit in the market are zero and the market is saturated. Hence, in the long run the monopolistic competition will only be breaking even.

But, For a firm under the oligopoly market the entry is not so easy, they have considerable economies of scale and in the long run more firms cannot enter the market to eliminate the profit completely. this will allow them to make some profit even in the long run.