If firms in a monopolistically competitive market are not making accounting profits, this will discourage more firms to enter the market.

Question

Quizplus · Accepted Answer

If firms are not making accounting profits, it may still be possible for them to earn economic profits (i.e. revenue in excess of opportunity costs). Therefore, potential entrants may still be attracted to the market even if current firms are not showing accounting profits.

If Firms in a Monopolistically Competitive Market Are Not Making