Long-run equilibrium in a monopolistically competitive industry requires the representative firm to earn zero economic profits,because ________.

Question

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In the long run, new firms will enter the industry due to its low barriers to entry. As a result, the demand for each individual firm's product will decrease, causing its demand curve to shift leftward, leading to a lower price. The representative firm's profit-maximizing level of output will decrease as well, driving the price down to the point where it equals its average total cost. At this point, the firm earns zero economic profits. Therefore, in the long run equilibrium, the representative firm in a monopolistically competitive industry will earn zero economic profits.

Long-Run Equilibrium in a Monopolistically Competitive Industry Requires the Representative