In a monopolistically competitive industry, the firms are currently making an economic profit. When this market moves to its long- run equilibrium, the firms' demand curves will have _______ and their economic profit will have _______.

Question

Quizplus · Accepted Answer

In the long-run equilibrium of a monopolistically competitive market, new firms enter the market if existing firms are making economic profits. This entry continues until economic profits are eliminated. The entry of new firms causes the demand curves for the products of existing firms to shift leftward, as consumers now have more options, leading to a decrease in economic profit to zero.

In a Monopolistically Competitive Industry, the Firms Are Currently Making