Question

What effect does the entry of new firms have on the economic profits of existing​ firms? When new firms enter a monopolistically competitive​ market, the economic profits of existing firms

Answer 1

decrease and demand curve will shift to the left.

Step-by-step explanation:

When new firms enter a monopolistically competitive​ market, the economic profits of existing firms will decrease. This is because, new firms enter an existing market if they spot a profit opportunity . The entry of these new firms will therefore increase the quantity of products or services supplied in the market which gives consumers more choices and substitutes. As a result, the demand curve of the existing firms will also shift to the left. because their