If firms in a monopolistically competitive market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to the long-run equilibrium?

Question

Quizplus · Accepted Answer

In the long-run, new firms will enter the market attracted by the economic profits. As a result, there will be an increase in supply and the demand for existing firms will decrease due to the increased competition. This will cause existing firms' demand curves to shift leftward, leading to a decrease in their economic profits.

If Firms in a Monopolistically Competitive Market Are Earning Economic