In the long run, new firms will enter a monopolistic competitive industry until
A)minimum average total cost is achieved.
B)all firms are incurring losses.
C)economic profits in the industry are zero.
D)maximum total revenue is achieved.

Question

Quizplus · Accepted Answer

In the long run, new firms will enter a monopolistic competitive industry until economic profits in the industry are zero. This is because in a monopolistically competitive market, firms have some market power to increase prices above their marginal cost, but they also face competition from other firms making it difficult to sustain profits in the long run. As new firms enter, the market becomes more competitive, reducing the market power of existing firms and lowering prices until economic profits reach zero. At this point, there is no further incentive for new firms to enter.

In the Long Run, New Firms Will Enter a Monopolistic