Explain how economic profits are reduced to zero as new firms enter a monopolistically competitive industry

Influx of new sellers means that each new firm will cut into the demand of the existing firms. That is, the demand curve for each of the existing firms will fall. With entry, not only will the firm's demand curve move inward but it also becomes relatively more elastic due to each firm's products having more substitutes. This decline in demand continues to occur until the average total cost curve becomes tangent with the demand curve, and economic profits are reduced to zero.

Economics

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All of the following might be considered rent-seeking behavior by firms, except one. Which is the exception?

a. bribes to government officials b. money spent on lobbying government officials c. advertisements describing the firm's position on an issue under legislative review d. money spent on advertising for new products e. time spent testifying before state and federal committees

Economics

Assume that M is $200 billion and V is 6. If V increases by 15 percent, then, according to the monetarist equation, nominal GDP will have increased by:

A. $140 billion B. $180 billion C. $220 billion D. $260 billion

Economics