If a typical monopolistically competitive firm is making short-run losses, then
A)other more competitive firms will enter the market.
B)as some firms leave, the remaining firms will experience an increase in the demand for their products.
C)as some firms leave, the demand for the products of the remaining firms will become more elastic.
D)the industry will eventually cease to exist.

Question

Quizplus · Accepted Answer

In the short run, if firms are making losses, some will exit the market. This reduces the supply of products, leading to an increase in demand for the remaining firms' products, potentially allowing them to cover costs and make normal profits in the long run.

If a Typical Monopolistically Competitive Firm Is Making Short-Run Losses