When initially a monopolistically competitive industry earns economic profit, the result of competition among sellers is usually that:
A) the price of the product increases to monopoly level.
B) the price of the product quickly reaches the perfectly competitive level.
C) firms in the industry gain market share.
D) firms in the industry lose market share.

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, economic profits attract new firms, increasing competition and leading to a loss of market share for existing firms.

When Initially a Monopolistically Competitive Industry Earns Economic Profit, the Result