A monopolistically competitive industry that earns economic profits in the short run will be able to expand its market share even if the market size remains constant.

Question

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In a monopolistically competitive market, firms can earn short-run economic profits, but in the long run, new firms will enter the market, attracted by these profits, which will erode the market share and profits of existing firms if the market size remains constant.

A Monopolistically Competitive Industry That Earns Economic Profits in the Short