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Question
Which two forms of market earn normal profit in the long run?
Options
Perfect competition and monopoly
Perfect competition and monopsony
Monopoly and monopolistic competition
Perfect competition and monopolistic competition
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Solution
Perfect competition and monopolistic competition
Explanation:
Perfect competition allows for free entry and exit, limiting firms to normal earnings over time. Monopolistic competition has low entry barriers, making it easy for new enterprises to enter the market. As a result, market supply increases. Increased availability leads to price reductions by enterprises. Therefore, corporations can only earn typical profits in the long run.
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