The entry and exit of firms in a monopolistically competitive market guarantees that

Question

Quizplus · Accepted Answer

In the long run, entry and exit of firms in a monopolistically competitive market will cause the demand curve to shift inward for existing firms, resulting in lower demand and lower prices for those firms. As a result of this competition, the price will eventually equal the average total cost, leading to zero economic profits for firms in the long run. Therefore, the correct answer is C, price equals average total cost in the long run.

The Entry and Exit of Firms in a Monopolistically Competitive