A monopolistically competitive industry that earns economic profits in the short run will face a more elastic demand curve in the long run.

Question

Quizplus · Accepted Answer

In the long run, new firms can enter the market, causing an increase in competition and a shift towards a more elastic demand curve for the incumbent firms. This can lead to a decrease in economic profits, as consumers have more substitutes to choose from.

A Monopolistically Competitive Industry That Earns Economic Profits in the Short