Posted by Jake on .
Isn't a monopolistic competitor most likely to earn zero economic profits in the long run, due mainly to the assumption of easy entry and exit?
I would argue no, a monopolistic competitor is likely to earn economic profits. Almost by definition, a monopolistic competitor exhibits some monopoly power. The power arises from brand loyality, some general or sepecific product differentiation, or some institutional reason -- that cannot be exactly copied by a new firm entering the industry.
That said, you could easily argue that the marginal firm (the last to enter and/or first to leave an industry) would most likely earn zero economic profits, even if it is monopolistic competitor.