Introduction:
In the long run, firms in different market structures may earn either economic profits or normal profits. Economic profits occur when a firm's revenues exceed its total costs, including both explicit and implicit costs, while normal profits occur when a firm's revenues just cover its total costs. In this case, the question asks under which market conditions firms make only normal profit in the long run.

Explanation:
The correct answer is option D, which refers to monopolistic competition. Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products, meaning each firm offers a slightly different product from its competitors. This differentiation allows firms to have some degree of market power, but it is not as significant as in other market structures like monopoly or oligopoly.

Characteristics of monopolistic competition:
1. Many firms: There are numerous firms operating in the market, each producing a slightly differentiated product.
2. Differentiated products: Firms in monopolistic competition differentiate their products through branding, product features, quality, packaging, etc.
3. Easy entry and exit: Firms can enter or exit the market relatively easily due to low barriers to entry.
4. Non-price competition: Due to product differentiation, firms in monopolistic competition compete primarily through non-price factors such as advertising, marketing, and product development.
5. Limited market power: Each firm has a small market share and limited control over the market price.

Reason why firms make only normal profits:
Under monopolistic competition, firms make only normal profits in the long run due to the following reasons:

1. Product differentiation: The differentiation of products allows firms to have some degree of market power, meaning they can charge a slightly higher price than marginal cost. This leads to the possibility of earning economic profits in the short run.
2. Easy entry and exit: As firms earn economic profits in the short run, new firms are attracted to enter the market. This increases competition and reduces the market share of existing firms.
3. Increased competition: With more firms entering the market, consumers have more options to choose from. This leads to a decrease in the demand for each individual firm's product, reducing their market power.
4. Zero economic profits: As new firms enter and compete, existing firms are forced to lower their prices or increase their non-price competition to maintain market share. This erodes any economic profits and drives firms towards earning only normal profits in the long run.
5. Long-run equilibrium: In the long run, firms in monopolistic competition reach a point where they earn only normal profits. This occurs when the demand for each firm's product is tangential to its average total cost curve. At this point, firms are covering all their costs but not earning any economic profits.

Conclusion:
In summary, firms operating in monopolistic competition make only normal profits in the long run due to the presence of product differentiation, easy entry and exit, increased competition, and the pursuit of long-run equilibrium. This market structure allows for some degree of market power but does not provide firms with the ability to consistently earn economic profits.

Market Conditions for Normal Profit in the Long Run
In the long run, firms tend to make normal profit under certain market conditions. Let's explore these conditions in detail:
1. Monopolistic Competition:
- Monopolistic competition is a market structure characterized by a large number of firms producing differentiated products.
- In this market structure, firms have some control over the price of their product due to product differentiation.
- In the long run, firms in monopolistic competition tend to make only normal profit because of the freedom of entry and exit.
- If a firm is making above-normal profit, new firms will enter the market, increasing competition and reducing their market share and profit margins.
- Conversely, if a firm is making below-normal profit or incurring losses, some firms may exit the market, reducing competition and allowing the remaining firms to regain normal profit.
2. Oligopoly:
- Oligopoly is a market structure characterized by a few large firms dominating the market.
- The behavior of firms in oligopoly can vary, but in some cases, firms may make only normal profit in the long run.
- In an oligopolistic market, firms are interdependent, meaning they consider the actions and reactions of their competitors when making pricing and production decisions.
- If a firm in an oligopoly tries to increase its profit by raising prices, other firms may react by reducing their prices, resulting in a price war and a reduction in profit margins.
- Similarly, if a firm tries to gain a larger market share by reducing prices, other firms may respond by doing the same, leading to lower profit margins.
- This competitive dynamic often leads to firms making only normal profit in the long run.
3. Duopoly:
- Duopoly is a market structure characterized by two dominant firms operating in the market.
- The behavior of firms in a duopoly can also lead to the long-run equilibrium with normal profit.
- Similar to oligopoly, firms in a duopoly are interdependent and consider the actions and reactions of their competitor.
- If one firm in a duopoly tries to gain a competitive advantage by increasing prices or reducing prices, the other firm may respond in a way that limits the potential for above-normal profit.
- This competitive dynamic often keeps the firms in a duopoly from making excessive profit in the long run, resulting in normal profit.
4. Monopoly:
- In a monopoly, there is a single firm dominating the market with no close substitutes.
- Unlike the other market structures mentioned above, a monopoly has the potential to make above-normal profit in the long run.
- This is because a monopolistic firm has significant market power and can set prices higher than its production costs.
- However, it is important to note that the ability to make above-normal profit in the long run is not guaranteed in all monopoly situations. Factors such as government regulations, potential competition, and changes in consumer preferences can impact the long-term profitability of a monopoly.
In conclusion, firms tend to make only normal profit in the long run under market conditions such as monopolistic competition, oligopoly, and duopoly. While monopolies have the potential to make above-normal profit, it is not always the case due to various factors.