00:01
Let's talk about profits in a monopolistic competitive market.
00:05
So let's say that a firm is earning economic profits in the short run, or they might be making losses in the short run.
00:14
What would happen in the long run? well, you see, unlike monopolies who can hold profits in the long run, monopolistic competitors are not going to be able to hold on to those profits.
00:27
And that comes from the very low barriers to entry that is a feature of monopolistic competition.
00:36
The producers can enter and leave these markets whenever they want.
00:40
And because their products are going to be somewhat similar, if you have positive profits in any market, very soon you're going to have someone coming in with a product that is very similar, not the same, but very similar, and that's going to soak up some of those profits.
01:00
Similarly, if people start earning negative profits, one of those producers from making negative profits is going to leave the market.
01:10
Now, if they leave the market, there's going to be a bunch of consumers left without a product that they need, and they're going to go to another good that is similar, not the same, but similar enough, that they'll be just as happy buying that product.
01:36
So, for example, let's see, android phones and apple, iphones...