The toothpaste industry with 5 firms is monopolistically competitive.If a sixth firm decides to entry the market,what will happen to firms' specific demand curves?

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, when a new firm enters the market, it increases the number of products available. This diversification means consumers have more options to choose from, leading to a decrease in demand for the existing firms' products. Hence, the specific demand curves for the existing firms will shift to the left.

The Toothpaste Industry with 5 Firms Is Monopolistically Competitive