What happens to an incumbent firm's demand curve in monopolistic competition as new firms enter?
A) It shifts right.
B) It shifts left.
C) It becomes horizontal.
D) New entrants will not affect an incumbent firm's demand curve.

Question

Quizplus · Accepted Answer

As new firms enter the market, the incumbent firm's demand curve will shift leftward because there will be more substitutes available for consumers to choose from, thus reducing demand for the incumbent firm's product.

What Happens to an Incumbent Firm's Demand Curve in Monopolistic