Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry toMultiple Choiceshift to the left.shift to the right.become less elastic.remain the same since entering firms serve other customers in the market.
Question
Suppose some firms exit an industry characterized by monopolistic competition. We would expect the demand curve of a firm already in the industry toMultiple Choiceshift to the left.shift to the right.become less elastic.remain the same since entering firms serve other customers in the market.
Solution
If some firms exit an industry characterized by monopolistic competition, we would expect the demand curve of a firm already in the industry to shift to the right.
Here's why:
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Monopolistic competition is a market structure in which many firms sell products that are similar but not identical. Each firm has a small market share and free entry and exit exist in the market.
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When some firms exit the market, the total quantity of goods or services available in the market decreases.
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The decrease in supply, with demand remaining the same, creates a shortage in the market.
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This shortage increases the demand for the products or services of the firms that are still in the market.
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As a result, the demand curve of a firm already in the industry shifts to the right, indicating an increase in demand for its products or services.
Similar Questions
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