As new firms enter a monopolistically competitive industry where profits are being made

Question

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As new firms enter a monopolistically competitive industry where profits are being made, the market becomes more crowded, increasing competition. This means that the demand curve facing each firm decreases, thereby reducing prices and profits as they try to differentiate their product and attract customers. The market demand curve may not necessarily decrease, but the individual firm's demand curve does, leading to a reduction in profits.

As New Firms Enter a Monopolistically Competitive Industry Where Profits