Exhibit 9-1 A monopolistic competitive firm If all firms in the industry are the same as the monopolistic competitive firm shown in this Exhibit 9-1, firms in the long run will:

Question

Exhibit 9-1  A monopolistic competitive firm  If all firms in the industry are the same as the monopolistic competitive firm shown in this Exhibit 9-1, firms in the long run will:

Quizplus · Accepted Answer

In the long run, the monopolistic competitive firm will only earn zero economic profit. However, new firms will be attracted to the industry due to the positive economic profit earned by the existing firms in the short run. This new entry will increase competition and erode the economic profit of the existing firms until they earn zero economic profit. Therefore, the correct answer is D as the industry will experience competition from new firms that enter the industry.

Exhibit 9-1 a Monopolistic Competitive Firm If All Firms in the Industry