Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition

-(Exhibit: Profit Maximization in Monopolistic Competition) If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the ________ ; in the long run, this will result in economic profit _______ and price _______ .

Question

Use the following for questions 22-31.
Exhibit: Profit Maximization in Monopolistic Competition

-(Exhibit: Profit Maximization in Monopolistic Competition) If other firms see economic profits in the industry, they will enter it, and the demand curve for firms already in the industry will shift to the ________ ; in the long run, this will result in economic profit _______ and price _______ .

Quizplus · Accepted Answer

In monopolistic competition, when new firms enter the market due to existing economic profits, the demand curve for existing firms shifts to the left. This increased competition over time leads to zero economic profit for firms, as prices adjust to equal average total cost (ATC), but not necessarily at the minimum ATC due to the differentiated nature of products in such markets.

Use the Following for Questions 22-31