in the long run, representative firms in monopolistically competitive markets will just break even --- that is, earn zero economic profits. Yet some firms in highly competitive markets manage to continue to earn economic profits indefinitely. For example, perfumes, cosmetics, and hair care firm L’Oreal, in business since 1907, remains highly profitable today, despite competing in fiercely competitive product categories. How has L’Oreal managed to stay profitable for so long (clue: they have a research and development staff of over 1000 people).

in the long run, representative firms in monopolistically competitive markets will just break even --- that is, earn zero economic profits. Yet some firms in highly competitive markets manage to continue to earn economic profits indefinitely. For example, perfumes, cosmetics, and hair care firm L’Oreal, in business since 1907, remains highly profitable today, despite competing in fiercely competitive product categories. How has L’Oreal managed to stay profitable for so long (clue: they have a research and development staff of over 1000 people).

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter14: Monopolistic Competition And Product Differentiation

Section: Chapter Questions

Problem 7P

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