In a monopolistically competitive industry,the freedom of entry and exit leads to

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, firms can enter and exit freely, which means that if firms are earning above-normal profits, more firms will enter the market, which will increase competition, reduce demand and profits, and vice versa. Hence, in the long-run equilibrium, firms in a monopolistically competitive industry will earn zero economic profits. This means that the answer is D.

In a Monopolistically Competitive Industry,the Freedom of Entry and Exit