As new firms enter a monopolistically competitive industry, the demand facing a typical firm will most likely

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As new firms enter a monopolistically competitive market, the industry becomes more competitive, which leads to a decrease in the demand facing a typical firm. Additionally, the entry of new firms increases the number of substitutes available to consumers, making them more price sensitive, which makes the demand more elastic. Therefore, the demand facing a typical firm decreases and becomes more elastic.

As New Firms Enter a Monopolistically Competitive Industry, the Demand