Over the past 5 years, 50 new restaurants have opened and 30 have closed in the city of Zuni. Currently there are 110 restaurants operating in the city. Which of the following best represents the market structure, barriers to entry, and economic profits in the long run?
a. Market Structure = Perfectly Competitive ; Barriers to Entry = Low ; Long Run Economic Profit = Negative
b. Market Structure = Perfectly Competitive ; Barriers to Entry = High ;Long Run Economic Profit = Positive
c. Market Structure = Monopolistic Competition ; Barriers to Entry = Low ;Long Run Economic Profit = Zero
d. Market Structure = Monopolistic Competition ; Barriers to Entry = High ; Long Run Economic Profit = Positive
e. Market Structure = Monopolistic Competition ; Barriers to Entry = High ; Long Run Economic Profit = Zero

A monopolistic competition is when there are plenty firms operating in the industry. The firms sell differentiated products and they set their market price. There are low barriers to entry and exit of firms.

Because there are low barriers, if firms are making economic profits in the short run, firms enter into the industry in the long run and economic profit falls to zero. Therefore, in the long run, firms earn only accounting profit only.

A resturant is an example of a monopolistic competition.

A perfect competition is when there are plenty buyers and sellers of identical products. There are no barriers to entry and exit of firms. Therefore, in the long run, firms earn zero economic profit.

I hope my answer helps you