Firms have incentive to enter a monopolistically competitive market if:

Question

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Firms have an incentive to enter a monopolistically competitive market if positive profits are being earned, indicating that there is demand for the product. If they can create a similar product, they can capture some of that demand and earn positive profits themselves. Choices A and D both involve zero profits, which would not be an incentive for firms to enter the market. Choice B involves duplicating the product exactly, which may not be possible if there are barriers to entry or if the existing firms have built up brand loyalty or other advantages.

Firms Have Incentive to Enter a Monopolistically Competitive Market If