Final answer:
A change in a firm's total profit due to discontinuing products reflects the competitive dynamics of a monopolistic market, where positive profits attract new entrants reducing demand, and losses lead to exits, increasing demand until firms reach zero economic profit.
Step-by-step explanation:
A change in a firm's total profit upon discontinuing products can be understood by examining monopolistic competition dynamics. In a monopolistic competitive market, firms make decisions based on their profit-maximizing quantity and price.
When a firm experiences positive economic profits, new competitors are attracted to the market, which decreases the demand for the original firm's product. This process causes the original firm's profit-maximizing price and output to decrease, shifting the firm towards a zero economic profit equilibrium. Conversely, if a firm is incurring losses, indicated by the average cost being above the price, firms will exit the industry. This exit leads to an increase in demand for the remaining firms, pushing them back to a zero economic profit status.