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

Question

Quizplus · Accepted Answer

When new firms enter a monopolistically competitive industry due to existing firms making economic profits, the demand for products from existing firms decreases as consumers have more options. This shift to the left makes the demand curve more elastic because existing firms have to be more responsive to price changes to maintain their customer base.

If Monopolistically Competitive Firms in an Industry Are Making an Economic