Question

explain Why a firm in monopolistic competition will make normal profit in the long run

Answer 1

In monopolistic competition, there are large number of firms with differentiated products. There can be  scarcity of a product in short run due to limited capital or fixed factors of production. In the long run, all factors are variable and when other firms see the opportunity to exploit abnormal profit as monopolistic competition has low barriers to entry and competition among the firms will lead to change strategy either to cost leadership or product differentiation. In both cases their profit will be reduced to normal profit.