When a monopolistically competitive firm earns economic profits in the short run, other firms will enter, shifting the market supply curve to the right.

Question

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In a monopolistically competitive market, firms differentiate their products, so the concept of a market supply curve shifting right, as in perfect competition, doesn't directly apply. Instead, new firms enter, increasing the number of products available, which can reduce demand for existing firms' products, potentially lowering their profits.

When a Monopolistically Competitive Firm Earns Economic Profits in the Short