In monopolistic competition, if economic profits are being earned, which of the following will not happen?
A) New firms will enter.
B) Entry will cause the market supply curve to shift to the right.
C) Entry will cause the firm's demand curve to shift to the left.
D) Entry will cause the market price to rise.

Question

Quizplus · Accepted Answer

In monopolistic competition, if economic profits are being earned, it attracts new firms into the market. This increase in the number of firms shifts the market supply curve to the right, leading to a decrease in market prices. Consequently, the firm's demand curve shifts to the left as competition increases, not causing the market price to rise.

In Monopolistic Competition, If Economic Profits Are Being Earned, Which