If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, economic profits attract new firms into the market, which increases competition and shifts the demand curve for existing firms to the left, decreasing their demand and profits. Therefore, existing firms would face a decrease in demand for each firm as the market adjusts to the long-run equilibrium.

If Firms in a Monopolistically Competitive Market Are Earning Economic