If monopolistically competitive firms are sustaining losses, then over the long run firms will:
A) exit the market, and losses will increase.
B) exit the market, and losses will decrease.
C) enter the market, and losses will increase.
D) enter the market, and losses will decrease.

Question

Quizplus · Accepted Answer

In the long run, if monopolistically competitive firms are sustaining losses, some firms will exit the market. This reduces competition for the remaining firms, allowing them to potentially increase their prices or gain a larger market share, which can lead to a decrease in losses or even the realization of profits.

If Monopolistically Competitive Firms Are Sustaining Losses, Then Over the Long