What is the result when new firms are encouraged to enter a monopolistically competitive market?
A)Some existing firms must be earning economic profits.
B)They do so because there is insufficient product differentiation.
C)The demand curve facing an existing firm shifts to the right.
D)The marginal cost curve facing an existing firm shifts downwards.

Question

Quizplus · Accepted Answer

If new firms enter a monopolistically competitive market, it means there is potential for profit. Therefore, if some firms are already earning economic profits, it is an incentive for new firms to enter the market.

What Is the Result When New Firms Are Encouraged to Enter