If monopolistically competitive firms in an industry are making an economic profit, then new firms will enter the industry and the product demand facing existing firms will shift

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When new firms enter a monopolistically competitive market, the market becomes more competitive, and the demand faced by existing firms will decrease, as consumers have more options to choose from. Due to increased competition, existing firms will have to reduce their prices, causing the demand curve to become more elastic. The left shift of the demand curve indicates that the quantity demanded at each price level has decreased; the increased elasticity of the demand curve means that consumers are relatively more responsive to price changes. This increased competition results in reduced economic profits for existing firms.

If Monopolistically Competitive Firms in an Industry Are Making an Economic