If firms in a monopolistically competitive industry are experiencing economic losses in the short run, some firms will _____ the industry, _____ demand for each individual firm until each firm earns a normal profit.
A) exit; reducing
B) enter; reducing
C) enter; increasing
D) exit; increasing

Question

Quizplus · Accepted Answer

In a monopolistically competitive industry, if firms are experiencing economic losses, some firms will exit the industry. This exit reduces the number of firms, which decreases the competition for the remaining firms. As a result, the demand for each individual firm's product increases, allowing them to eventually earn a normal profit.

If Firms in a Monopolistically Competitive Industry Are Experiencing Economic