The process of entry and exit into a monopolistically competitive market causes:
A) the firm's demand curve to shift left and/or right.
B) the firm's supply curve to shift left and/or right.
C) the firm's average total cost curve to shift left and/or right.
D) the firm's marginal cost curve to shift straight up and/or down.

Question

Quizplus · Accepted Answer

Entry of new firms increases the number of competitors in the market, leading to a rightward shift in the demand curve for each existing firm. Conversely, exit of firms reduces the number of competitors in the market, leading to a leftward shift in the demand curve for the remaining firms. Therefore, entry and exit cause shifts in the demand curve, affecting the quantity demanded and price of the product.

The Process of Entry and Exit into a Monopolistically Competitive