The profit earned by a monopolistic competitor in the long run after the entry of new firms is ________.

Question

Quizplus · Accepted Answer

After the entry of new firms, the monopolistic competitor will face increased competition, which will reduce its market power and ability to charge higher prices. As a result, its profits will be lower than what it earned before the entry of new firms. This is because the new firms will offer substitutes to the consumers, which will increase the elasticity of demand for the monopolistic competitor's product. In the long run, the firm will only earn normal profits as the market reaches equilibrium.

The Profit Earned by a Monopolistic Competitor in the Long