Other things equal, if more firms enter a monopolistically competitive industry,

Question

Quizplus · Accepted Answer

With more firms entering a monopolistically competitive industry, the market becomes more crowded, leading to an increase in competition. This increased competition shifts the demand curves facing existing firms to the left, meaning that they will have to lower their prices to remain competitive. This is because consumers have more options to choose from, which leads to a decrease in the market power of each individual firm.

Other Things Equal, If More Firms Enter a Monopolistically Competitive