If economic losses exist in a monopolistically competitive market,
A)new products will be introduced.
B)new firms will enter the market because they see potential for profit in the future.
C)firms will exit the market and the existing firms' demand curves will shift inward.
D)the average total cost curve must lie below the demand curve.
E)firms will exit the market and existing firms' demand curves will shift outward.

Question

Quizplus · Accepted Answer

In a monopolistically competitive market, if firms are experiencing economic losses, some firms will exit the market. This reduces the number of competitors, causing the demand curves for the remaining firms to shift outward, potentially allowing them to achieve normal profits.

If Economic Losses Exist in a Monopolistically Competitive Market