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From course:

Economics A Level (DONEEEEEEE)

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Question:

Why can Dynamic Efficiency not be Achieved in a Monopolistic Competition?

Author: eric_galvao



Answer:

-The Amount of Time the New Firms force All Firms in a Monopolistic Market to make Normal Profit = Time for Firms already in the Market to make a Supernormal Profit -Supernormal Profit provide as a Reward for Investing or Innovation -Lack of Barriers however means the Firms are not Likely to Invest Lots onto New Innovations, so Less Dynamic Efficiency -In the Long Run, there will not be a Lot of Money left for Investment


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