As new firms enter a monopolistically competitive market,existing firms will face a lower average cost of production because the cost is spread across more firms.

Question

Quizplus · Accepted Answer

The entry of new firms in a monopolistically competitive market will increase competition, which can lead to a decrease in market share and demand for existing firms. This can result in higher average costs of production for existing firms, as they may have to spend more on advertising or product differentiation to maintain their market position. Therefore, the statement is false.

As New Firms Enter a Monopolistically Competitive Market,existing Firms Will