If a monopolistically competitive firm's demand curve is shifting left,it will stop shifting when:

Question

Quizplus · Accepted Answer

If a monopolistically competitive firm's demand curve shifts to the left, it means that the firm has lost some of its market power and hence, its ability to charge higher prices than its competitors. This will lead to a decrease in the firm's revenue and profits. In response, firms will try to exit the market or reduce their output to try to restore their profits. If this continues, eventually, the market price will fall to the point where firms earn zero economic profit, and there is no more incentive for new firms to enter the market. At this point, the demand curve has stopped shifting leftward, the price is equal to the firm's average total cost, and the firm is earning zero economic profit. Thus, all of these statements are true.

If a Monopolistically Competitive Firm's Demand Curve Is Shifting Left,it