New firms enter a monopolistically competitive market structure in the long run if the price charged by the existing firms in the short run ________.

Question

Quizplus · Accepted Answer

If the price charged by existing firms in a monopolistically competitive market structure exceeds their average total cost of production, new firms will see it as an opportunity to enter the market and compete by offering similar products at a lower price. This will drive down the market price and increase competition, ultimately leading to firms earning zero economic profit in the long run.

New Firms Enter a Monopolistically Competitive Market Structure in the Long