Assuming that the total market size remains constant, a monopolistically competitive firm earning profits in the short run will find the demand for its product decreasing in the long run because
A)new entrants into the market are more likely to have cutting edge products.
B)as the firm raises its price in the long run, it will lose some customers to new entrants in the market.
C)some of its customers have switched to purchasing the products of new entrants in the market.
D)its costs of production rises.

Question

Quizplus · Accepted Answer

In the long run, new firms enter the market due to the presence of profits, increasing competition and leading some customers to switch to the products of these new entrants, thus decreasing the demand for the original firm's product.

Assuming That the Total Market Size Remains Constant, a Monopolistically