If a firm's demand curve in a monopolistically competitive market is shifting left:
A) competition is likely entering with similar products.
B) firms must be exiting the industry.
C) economic profits must be increasing.
D) None of these statements is true.

Question

Quizplus · Accepted Answer

If the demand curve in a monopolistically competitive market is shifting left, it indicates a decrease in demand for the firm's product. This could be due to consumers switching to similar products offered by new competitors entering the industry, hence increasing competition. This rules out option B, which suggests that firms must be exiting the industry. Option C is also not true as a decrease in demand is more likely to lead to a decrease in economic profits. Therefore, the best answer is A.

If a Firm's Demand Curve in a Monopolistically Competitive Market