What will happen in the long run if firms in monopolistic competition incur economic loss?

Question

Quizplus · Accepted Answer

Firms in monopolistic competition will leave the industry until the remaining firms make zero economic profit. In the long run, firms cannot sustain economic losses indefinitely and will eventually exit the industry. As the number of firms decreases, the remaining firms will gain more market power and be able to increase their price and make zero economic profit in the long run.

What Will Happen in the Long Run If Firms in Monopolistic