In the long run, what happens to the demand curve facing a monopolistically competitive firm that is earning short-run profits?
A)The demand curve will shift to the left and became more elastic.
B)The demand curve will shift to the left and became less elastic.
C)The demand curve will shift to the right and became more elastic.
D)The demand curve will shift to the right and became less elastic.

Question

Quizplus · Accepted Answer

In the long run, new firms will enter the market, increasing competition and shifting the demand curve to the left. As the market becomes more competitive, consumers have more alternatives to choose from, making demand more elastic.

In the Long Run, What Happens to the Demand Curve