If firms in a monopolistically competitive market are earning negative economic profits, the demand curve of a single firm will likely shift to the _______ as other firms _______ the industry.

Question

Quizplus · Accepted Answer

When firms in a monopolistically competitive market are earning negative economic profits, it indicates that the market is not profitable, leading firms to exit the industry. As firms exit, the remaining firms face less competition, which can increase demand for their products, causing the demand curve of a single firm to shift to the right.

If Firms in a Monopolistically Competitive Market Are Earning Negative