Micro Test 4-Everything

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As new firms enter the​ market, a monopolistically competitive firm can maintain profits by

A and C only

Which of the following best describes how the product differentiation of monopolistically competitive firms may benefit consumers?

I AM SURE Product differentiation can locate firms more conveniently to consumers and offer versions of a product or service that better fits their needs.

Which of the following statements is​ correct?

Legally enforcing trademarks can be difficult.

Which of the following statements is​ true?

The firm is not productively efficient because the​ profit-maximizing price is not at the minimum of average total cost.

Consider the graph to the right. Is it possible to say whether this firm is a perfectly competitive LOADING... firm or a monopolistically competitive LOADING... ​firm?

Yes. This is a monopolistically competitive firm because its demand curve is downward sloping.

With a​ downward-sloping demand​ curve, marginal revenue is below price

because the firm must lower its price to sell additional units.

If the industry is monopolistically​ competitive, the reaction of consumers

could be to remain loyal to​ Jerry's and pay the higher price.

If a publisher does not raise the price of a book following an increase in its production​ cost, the result will be

less than maximum profit

Doing additional business at lunchtime could be particularly likely to add to Buffalo Wild Wings profits because the

marginal cost of doing so would be less than the marginal revenue.

A monopolistically competitive firm produces where:

marginal revenue equals marginal cost

Which of the following statements is​ true?

The firm is not allocatively efficient because the​ profit-maximizing price exceeds marginal cost.

If marginal revenue slopes​ downward, which of the following is​ true?

The firm must decrease its price to sell a larger quantity.

Which type of efficiency does a monopolistically competitive firm achieve in the long​ run?

neither allocative nor productive efficiency

A monopolistically competitive firm is not allocatively efficient because

price exceeds marginal cost.

Do consumers benefit in any way from monopolistic competition relative to perfect​ competition? Compared to perfect​ competition, when a consumer purchases a product from a monopolistically competitive​ firm, the consumer benefits from purchasing a product

that is appealing because it is differentiated

Refer to the figure to the right. What will happen if there is entry into the​ market?

the demand curve will shift to the left

Stephen runs a pet salon. He is currently grooming 100 dogs per week. If instead of grooming 100 ​dogs, he grooms 101 ​dogs, he will add ​$67.03 to his costs and ​$66.88 to his revenues. What will be the effect on his profits of grooming 101 dogs instead of 100 ​dogs?

-0.15

What quantity on the graph represents​ long-run equilibrium if the firm were perfectly​ competitive? 6 burritos per week.

6

If Daniel sells 300 Big Macs at a price of ​$4.00​, and his average cost of producing 300 Big Macs is ​$3.75​, what is his​ profit? Profit equals ​$ 75 ​(enter your response in dollars and cents​).

75

For​ years, the Abercrombie​ & Fitch clothing stores received free advertising by placing the company logo prominently on the​ shirts, hoodies, and other clothing they sell. A news story indicated that in​ 2015, Abercrombie intended to remove its logos from its clothing. ​Source: Suzanne Kapner and Erin​ McCarthy, "Abercrombie to Remove Logos From Most​ Clothing," Wall Street Journal​, August​ 29, 2014. Abercrombie would give up free advertising by removing the logos because the logos

are only a profitable strategy if consumers like wearing clothing with logos.

A monopolistically competitive firm has excess capacity in the sense that if it increased output beyond the quantity associated with profit​ maximization, it could produce at a lower average cost.

average

A monopolistically competitive firm is not productively efficient because it produces a level of output where

average total cost is not at a minimum.

The monopolistically competitive firm sells​ _________ product and faces​ _________ demand curve.

a​ differentiated; a​ downward-sloping

Why does a local​ McDonald's face a​ downward-sloping demand curve for its Quarter​ Pounder? In monopolistically competitive​ markets,

changing the price affects the quantity sold because firms sell differentiated products.

How does the​ long-run equilibrium for a monopolistically competitive market differ from the​ long-run equilibrium for a perfectly competitive​ market? One way in which monopolistically competitive markets and perfectly competitive markets differ is that in​ long-run equilibrium, monopolistically competitive firms

charge a price greater than marginal cost

What are the differences between the​ long-run equilibrium of a perfectly competitive firm and the​ long-run equilibrium of a monopolistically competitive​ firm? Unlike perfectly competitive​ firms, in the long run monopolistically competitive firms

charge a price greater than marginal cost and do not produce at minimum average total cost.

This model does not fit​ Germano's description because he assumes​ what?

demand is perfectly elastic

How do firms use​ marketing? A firm might use marketing to

determine which product to produce or decide how to distribute their product

What are the key factors that determine the profitability of a firm in a monopolistically competitive​ market? Monopolistically competitive firms will be profitable to the extent that they

differentiate their product and produce at lower average cost than competitors.

b. When the Bauers founded​ Crumbs, they could have

expected that competitors would reduce the​ company's profit and planned to diversify.

An increase in the price of cappuccino will increase the quantity of cappuccinos demanded.

false

What are the most important differences between perfectly competitive markets and monopolistically competitive​ markets? Unlike in perfectly competitive​ markets, in monopolistically competitive​ markets,

firms face​ downward-sloping demand​ curves, and the products competitors sell are differentiated.

In​ 2010, Domino's launched a new advertising campaign admitting that its pizzas had not tasted very​ good, but claiming that they had developed a new recipe that greatly improved the taste. If​ Domino's succeeded in convincing consumers that its pizza was significantly better than competing​ pizzas, would its demand curve become flatter or​ steeper? When a product becomes less differentiated from other​ products, its demand curve becomes

flatter

he ability of a publishing company to raise book prices when costs increase would be​ greater, the lower is the elasticity of demand for published books.

lower

Chipotle Mexican Grill restaurants have been a very popular​ "fast-casual" dining optionlong dashwith better food choices than​ fast-food restaurants like​ McDonald's, and faster service and lower prices than traditional restaurants.​ Chipotle's profit per restaurant is much greater than​ McDonald's. Looking forward to ten years from​ now, you would expect​ Chipotle's economic profit per restaurant to be

lower because more firms will imitate chipotle

Is zero economic profit inevitable in the long run for monopolistically competitive​ firms? In the long​ run, monopolistically competitive firms

may continue to earn profit by improving their product.

This happens because the slope of the demand curve reflects buyer responsiveness to a price​ change, which is determined in part by the availability of substitutes.​ Thus, when a product becomes less differentiated from other​ products, buyers perceive it as having more good​ substitutes, and this altered perception induces buyers to be more responsive to price.

more more

If a monopolistically competitive firm's demand curve is above its average total cost curve, then this firm is making:

positive economic profit

A monopolistically competitive firm produces where​ _________, while a perfectly competitive firm produces where​ _________.

price is greater than marginal​ cost; price is equal to marginal cost

How might a monopolistically competitive firm continually earn economic profit greater than​ zero? To earn economic profit greater than​ zero, a monopolistically competitive firm must

produce a product that creates value for consumers relative to competitiors

Which of the following terms is missing in the box on the​ right?

profitability

As some bookstores exit the​ market, the demand curve faced by a remaining bookstore will shift to the right . The demand curve may also become less elastic because consumers will have fewer other stores to buy from. After the exit of the competing​ stores, this store is expected to break even

right less fewer break even

When a firm advertises a​ product, it is trying to shift the demand curve for the product to the​ ________ and make it more​ ________.

right; inelastic

The graph shows a short-run equilibrium because the firm is making positive economic profits

short-run positive

Suppose a local​ McDonald's hamburger restaurant raises the price of its cheeseburgers from​ $2.00 to​ $2.50. What will happen to the quantity of​ McDonald's cheeseburgers​ demanded? If​ McDonald's raises the price of​ it's cheeseburgers, then

some of​ McDonald's customers, but not all of​ them, will still demand​ McDonald's cheeseburgers because this restaurant may be closer to them

Suppose the market for​ fast-food value meals is monopolistically​ competitive, with many restaurants selling their own brand of food. Assume the restaurants in the industry behave optimally by maximizing profit. The figure to the right represents the market for one monopolistically competitive​ firm's value meals. How will this figure change as the market moves toward​ long-run equilibrium? In the long​ run,

the demand curve will shift to the left and become more elastic because the firms are currently making profit.

What factors under the control of owners and managers make a firm successful and allow it to earn economic​ profits? Owners and managers control some of the factors that make a firm successful such as

the firm's ability to produce its product at a lower average cost than competitors

Suppose a firm introduces a significantly different version of an old product. How might that firm use brand management LOADING...​? Such a firm might use brand management to

to postpone the time when they will no longer be able to earn economic profits

The increase in the cost of beef will shift up ​Chipotle's marginal and average cost curves. As a​ result, the price it charges for beef burritos will increase and the quantity it sells will fall .

up cost increase fall

Would this additional lunchtime business result in the chain earning economic profits in the long​ run?

​No, because this strategy can be imitated by other similar firms.

At the​ profit-maximizing level of​ output, how much economic profit is this firm​ earning?

​Zero, because at the​ profit-maximizing output​ level, the price equals average total cost.

With a​ downward-sloping demand​ curve, average revenue is equal to price

​actually, average revenue is always equal to​ price, whether demand is downward sloping or not.

As a result of​ "recent brewing​ advances" that improve​ taste, the market for nonalcoholic beer will

all of the above

If​ McDonald's raises the price it charges for Quarter Pounders above the prices charged by other​ fast-food restaurants,​ won't it lose all its​ customers?

no

Determine the graph that shows the impact on a​ firm's profits when it increases spending on advertising and the increased advertising has no effect on the demand for the​ firm's product.

C

In the figure to the​ right, consider the marginal revenue of the eighth unit sold. When the firm cuts the price from $ 6.00 to $ 5.60 to sell the eighth ​unit, the area in the graph denoting the output effect is given by In​ dollars, this effect is When the firm cuts the price from $ 6.00 to $ 5.60 to sell the eighth ​unit, the area in the graph denoting the price effect is given by

C 5.60 B

What​ trade-offs do consumers face when buying a product from a monopolistically competitive​ firm?

Consumers pay a price greater than marginal​ cost, but they also have choices more suited to their tastes.

How does the entry of new coffeehouses affect the profits of existing​ coffeehouses?

Entry will decrease the profits of existing coffeehouses by shifting each of their individual demand curves to the left and making the demand curves more elastic.

A skeptic​ says, ​"Marketing LOADING... research and brand management are redundant. If a company wants to find out what customers​ want, it should simply look at what​ they're already​ buying." Which of the following statements​ is/are true? ​(Mark all that​ apply.)

Firms who discover new information about what consumers want can make a profit in the short run. Your answer is correct.B. A firm can enter a market with products like those of the competition and earn a profit if its costs are lower. A and B

A student makes the following​ comment: I can understand why a perfectly competitive LOADING... firm will not earn profits in the long run because a perfectly competitive firm charges a price equal to marginal cost. But a monopolistically competitive LOADING... firm can charge a price greater than marginal​ cost, so why​ can't it continue to earn profits in the long​ run? How would you answer this​ question?

In the long​ run, competition shifts the​ firm's demand curve leftward until price equals average total cost at the quantity where marginal revenue equals marginal cost. At this​ quantity, price is greater than marginal cost.

"In early January last​ year, after a disappointing Christmas season and amid worries about competition from discount​ retailers, Zale Corp. decided to shake things​ up: The​ self-proclaimed jeweler to Middle America was going to chase upscale customers. . . . The move was a disaster. The​ Irving, Texas, retailer lost many of its traditional customers without winning the new ones it​ coveted." ​Source: Ann Zimmerman and Kris​ Hudson, "Chasing Upscale Customers Tarnishes​ Mass-Market Jeweler," Wall Street Journal​, June​ 26, 2006. p. A1. Why would a firm like Zale abandon one market niche for another market​ niche? ​(Mark all that​ apply.)

Increasing competition in the current market is eroding profits. Your answer is correct.B. To expand into a more profitable market.

Would a firm selling in a monopolistically competitive LOADING... market ever produce where marginal revenue is​ negative? A.

No because marginal cost cannot be negative.

A monopolistically competitive firm​ doesn't produce where P​ = MC like a perfectly competitive firm because

P exceeds MR for a monopolistically competitive​ firm, and​ it's MR that must equal MC for profit maximization.

In​ 1916, the Ford Motor Company produced​ 500,000 Model T Fords at a price of​ $440. The company made a profit of​ $60,000,000 that year. Henry Ford told a newspaper reporter that he intended to reduce the price of the Model T to​ $360, and he expected to be able to sell​ 800,000 cars at that price. Ford​ said, ​"Less profit on each​ car, but more​ cars, more employment of​ labor, and in the end we get all the total profit we ought to​ make." a. Did Ford expect the total revenue he received from selling Model Ts to rise or fall following the price​ cut?

Rise because he assumed demand was elastic.

​"If firms in a monopolistically competitive industry are earning economic​ profits, new firms will enter the industry.​ Eventually, the representative firm will find its demand curve has shifted to the​ left, until it is just tangent to its average cost curve and it is earning zero profit. Because firms are earning zero profit at that​ point, some firms will leave the​ industry, and the representative firm will find its demand curve will shift to the right. In​ long-run equilibrium, price will be above average total cost by just enough so that each firm is just breaking​ even." Is the analysis correct or​ incorrect?

The analysis is incorrect. Firms will not leave the industry when earning zero economic profit. When the​ firm's demand curve is tangent to its average cost curve it is still earning zero economic profit.

A firm that is first to the market with a new product frequently discovers that there are design flaws or problems with the product that were not anticipated. For​ example, the ballpoint pens made by the Reynolds International Pen Company often leaked. What effect do these problems have on the innovating​ firm, and how do these unexpected problems open up possibilities for other firms to enter the​ market?

The design flaw will harm the​ firm's reputation, which will be costly to restore. This will create opportunities for competitors to enter the market with a better product. Often the first firm to market is not the most successful over the long term.

Is Buffalo Wild Wings likely to sustain this greater pricing power in the long​ run?

​No, because its attributes can be imitated by other similar firms.

Are the brewers responding to consumer desires or will consumers be​ exploited?

The market for beer is largely consumer driven​ and, with greater product differentiation from​ producers, consumers will clearly benefit.

Are monopolistically competitive firms efficient in​ long-run equilibrium? Monopolistically competitive firms

are not productively efficient because they do not produce at minimum average total cost and they are not allocatively efficient because they produce where price is greater than marginal cost.

There are many wheat farms in the United​ States, and there are also more than​ 1,800 Chipotle restaurants. ​Why, then, does a Chipotle restaurant face a​ downward-sloping demand curve when a wheat farmer faces a horizontal demand​ curve?

Wheat is a homogeneous​ good, while Chipotle is able to differentiate its food from other restaurants.

What is the difference between zero accounting profit and zero economic​ profit?

Zero economic profit includes a​ firm's implicit costs but zero accounting profit does not.

The actions taken by General Mills and other food and beverage firms may benefit their consumers because consumers are

able to purchase a product that is differentiated and more closely suited to their tastes.

Define marketing. Is marketing just another name for​ advertising? Marketing is

all activities necessary for a firm to sell a product including advertising, product design, and product distribution

Michael Korda for many years was​ editor-in-chief at the Simon​ & Schuster book publishing company. He has described the many books that have become bestsellers by promising to give readers financial advice that will make them​ wealthy, by, for​ example, buying and selling real estate. Korda is very skeptical about how useful the advice in these books​ is: ​ "I have yet to meet anybody who got rich by buying a​ book, though quite a few people got rich by writing​ one." ​Source: Michael​ Korda, Making the​ List: A Cultural History of the American​ Bestseller, 1900-1999, New​ York: Barnes​ & Noble​ Books, 2001, p. 168. a. On the basis of the analysis in this​ chapter, which of the following statements is​ true?

all of the above

Some companies have done a poor job at protecting the images of their products LOADING.... For​ example, Hormel's Spam brand name is widely ridiculed and is associated with annoying commercial messages received via​ e-mail. You might have heard of other cases where companies have failed to protect their brand names. What can firms do in such​ cases?

all of the above

​7-Eleven, Inc., operates more than​ 20,000 convenience stores worldwide. Edward​ Moneypenny, 7-Eleven's chief financial​ officer, was asked to name the biggest risk the company faced. He​ replied, ​"I would say that the biggest risk that​ 7-Eleven faces, like all​ retailers, is competition. . . .because that is something that​ you've got to be aware of in this​ business." ​Source: Company​ Report, "CEO​ Interview: Edward Moneypennylong dash​7-Eleven ​Inc.," The Wall Street Transcript Corporation. Which of the following statements is​ true?

all of the above

Refer to the figure to the right. Note that P and Q are the​ profit-maximizing price and quantity. This firm was first in the market. It is currently earning​ what?

an economic profit

The Wall Street Journal reported that Western European brewers such as​ Heineken, Carlsberg, and​ Anheuser-Busch InBev are increasing their production and marketing of nonalcoholic beer. The article quotes a Carlsberg executive for​ new-product development as​ saying: Nonalcoholic beer is a largely unexploited opportunity for big brewers. It is quite a natural move when you see that the overall beer market​ [in Western Europe​ is] going down.​ So, of​ course, we're battling for market share. The article further states that​ "brewers are hoping to capitalize on health​ consciousness" and that​ "recent brewing advances are helping improve the taste of nonalcoholic​ beers." ​Source: Ilan​ Brat, "Taking the Buzz Out of​ Beer" Wall Street Journal​, August​ 30, 2011. Nonalcoholic beer is an​ "unexploited opportunity" for big brewers in the sense that it offers them a chance

both A and B

What term describes the actions of a firm intended to maintain the differentiation of a product over​ time?

brand managment

There are about 400 wineries in​ California's Napa Valley. Suppose the owner of one of the winerieslong dash​Jerry's Wine Emporiumlong dashraises the price of his wine by​ $5.00 per bottle. If the industry is perfectly​ competitive, the reaction of consumers would be to

buy wine from another winery

In recent​ years, consumers' have been less willing to buy packaged foods that contain gluten or high levels of fat and​ salt, or soft drinks containing sugar. Firms such as General​ Mills, Kellogg and​ Coca-Cola have responded by modifying many of their products​ by, for​ example, making them​ gluten-free and eliminating or reducing​ salt, sugar, and artificial flavors and colors. General Mills Chief Executive Officer Ken Powell​ explained, "The reality of the changing food values of our consumers is central to what​ we're doing." Monopolistically competitive firms do not achieve productive efficiency or allocative​ efficiency, but economists argue that consumers benefit when these firms differentiate their products to appeal to consumers.

do not produce at minimum average total​ cost, and do not set price equal to marginal cost.

The entry of new firms cause the demand curve of an existing firm in a monopolistically competitive market to shift to the left because​ ______ and become more elastic since​ ______.

each will have a smaller share of the existing​ market; consumers will have additional choices

JustFab is an online fashion retailer that analyzes information about customers obtained from its website to gauge the clothing they like most and the frequency of their purchases. This information has enabled the company to respond quickly to changes in fashion trends and to better control its inventory. The type of customer data JustFab gathers is not available to retailers that sell only in​ brick-and-mortar stores.

enhance its marketing​ efforts, and increase its sales and profits.

Ben and Jerry are managers at the​ company, and they have this​ discussion: Ben​: We should produce​ 4,000 lamps per month because that will minimize our average costs. Jerry​: But​ shouldn't we maximize profits rather than minimize​ costs? To maximize​ profits, don't we need to take demand into​ account? Ben​: ​Don't worry. By minimizing average​ costs, we will be maximizing profits. Demand will determine how high the price we can charge will​ be, but it​ won't affect our​ profit-maximizing quantity. Evaluate the discussion between the two managers. ​Ben's assertion that the firm should produce the quantity of lamps where average costs are minimized is

incorrect because profits are instead maximized at the quantity where marginal cost equals marginal​ revenue, which may be different since marginal revenue depends on consumer demand.

Many firms advertise. What effect does advertising have on firm​ profits? One possible effect of advertising is to

increase profits by making the demand curve for the product more inelastic

A monopolistically competitive firm in a long-run equilibrium produces where:

its demand curve is tangent to its average total cost curve

A monopolistically competitive firm in a​ long-run equilibrium produces where

its demand curve is tangent to its average total cost curve.

Wealthy investors often invest in hedge funds. Hedge fund managers use​ investors' money to buy​ stocks, bonds, and other investments with the intention of earning high returns. But an article in the New York Times notes​ that: ​"Even professionals have a problem in evaluating hedge fund​ performance, because distinguishing skill from luck ... is extremely​ difficult." ​Source: Jesse​ Eisinger, "Pruning Hedge Fund Regulation Without Cultivating Better​ Rules," New York Ti​mes, September​ 5, 2012. Is it ever easy to determine whether a firm making economic profits is doing so because of the skills of the​ firm's managers or because of​ luck? Briefly explain. Determining why a firm is making economic profits​ (i.e., whether profitability is due to managerial skill or​ luck) is

never easy because profitability is determined by factors under a​ firm's control, such as the ability to differentiate its product​, and factors beyond its​ control, such as chance events.

Is it possible for marginal revenue for a firm operating in a perfectly competitive industry to be​ negative?

no

An article in the New York Times describes Chipotle as​ "the restaurant chain that has come to symbolize the tastes of the millennial​ generation" and lists the sources of​ Chipotle's success as including the​ restaurant's allowing​ "their customers to tailor their​ meals, and still have them ready in a flash ... playing to consumer tastes for​ customization, speed and ingredients from sources that adhere to animal​ welfare, organic and other​ standards." ​Source: Stephanie​ Strom, "Chipotle Posts Another Quarter of​ Billion-Dollar Sales," New York Times​, April​ 21, 2015. Are these attributes likely to ensure that Chipotle will earn an economic profit in the long​ run?

no, because these attributes can be imitated by other similar firms

n describing what happened to Crumbs​ Bakery, an analyst of the food industry noted the entry of competitors such as Sprinkles and Georgetown Cupcake. He​ concluded, "It got to the level where there were too many cupcakes and not enough people who wanted​ to, or could afford​ to, eat​ them." ​Source: Sydney​ Ember, "As the Cupcake​ Declines, Crumbs Shuts Its​ Doors," New York Times​, July​ 8, 2014. a. When the analyst said there were too many cupcakes and not enough people who wanted to eat​ them, he meant that

the supply of cupcakes exceeded the demand for cupcakes.

Which of the following is a threat to a trademarked LOADING... company​ name? Trademarked brands are threatened by

their names becoming so widely used for a type of product that they no longer are associated with a specific company.

Which of the following is an example of a trademarked name that has become so widely used for a type of product that it is no longer associated with the product of a specific​ company?

thermos

Does the fact that monopolistically competitive markets are not allocatively or productively efficient mean that there is a significant loss in economic​ well-being to society in these​ markets? Though monopolistically competitive markets are not allocatively or productively​ efficient, consumers benefit in that

they are able to purchase a differentiated product that more closely suits their tastes.

n​ 2015, analysts at the Goldman Sachs investment bank were optimistic that Buffalo Wild Wings would increase its profit over the next few years. They cited two factors as favorable to the​ chain's profitability: the​ chain's "greater pricing power allows them to easily implement menu changes to take advantage of​ [changes in] consumer​ preferences" and​ "the opportunity for the chain to grow as a lunch​ destination." ​Source: Kathleen​ Burke, "Goldman Upbeat on Casual Dining Amid Changing Consumer​ Tastes," marketwatch.com​, July​ 1, 2015. When the analysts refer to the​ chain's greater pricing​ power, they mean

the​ chain's ability to change its price without losing substantial sales.

Why are many companies so concerned about brand​ management? Companies use brand management

to maintain product differentiation and earn economic profits in the short run.

William Germano previously served as the vice president and publishing director at the Routledge publishing company. He once gave the following description of how a publisher might deal with an unexpected increase in the cost of publishing a​ book: ​"It's often asked why the publisher​ can't simply raise the price​ [if costs​ increase]... It's likely that the editor​ [is already]... charging as much as the market will bear. ... In other​ words, you might be willing to pay​ $50.00 for a ... book on the Brooklyn​ Bridge, but if... production costs​ [increase] by 25​ percent, you might think​ $62.50 is too much to​ pay, though that would be what the publisher needs to charge. And indeed the publisher may determine that​ $50.00 is this​ book's ceilinglong dashthe most you would pay before deciding to rent a movie​ instead." ​Source: William​ Germano, Getting It​ Published: A Guide to Scholars and Anyone Else Serious about Serious Books​, ​Chicago: University of Chicago​ Press, 2001, pp.​ 110-111. According to the graph on the right and what you have learned in this​ chapter, a monopolistically competitive firm responds to an increase in cost by adjusting the price

upward

Give two examples of products sold in perfectly competitive markets and two examples of products sold in monopolistically competitive markets.

wheat and corn are sold in perfectly competitive markets and maybelline cosmetics and ralph lauren cologne are sold in monopolistically competitive markets

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

will decrease because their demand curves will shift to the left

Is zero economic profit inevitable in the long run for a monopolistically competitive​ firm?

​No, a firm could try to continue making a profit in the long run by reducing production costs and improving its products.


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