If firms in a monopolistically competitive market are incurring economic losses,which of the following scenarios would best describe the change existing firms (who are able to stay in the market)would face as the market adjusts to the long-run equilibrium?

Question

Quizplus · Accepted Answer

In the long run, firms incurring losses will exit the market, reducing the number of competitors. This reduction in competition increases the demand for the remaining firms' products, shifting their demand curves to the right.

If Firms in a Monopolistically Competitive Market Are Incurring Economic