In a monopolistically competitive market, firms can earn long-run economic profits due to product differentiation, but they will eventually face zero economic profit as new firms enter the market. True or False?

The statement is true. In a monopolistically competitive market, firms sell products that are similar but slightly different, which gives them some control over their prices. At first, a firm can earn long-run economic profits because customers prefer its unique product over others. However, when these profits attract new firms to the market, competition increases, and the original firm's market share and profits begin to decline. Eventually, the market reaches a point where profits are driven down to zero, as the new firms offer similar products and prices become more competitive.