Asked by Anika Singh on Jun 11, 2024
Verified
As new firms enter a monopolistically competitive market, the demand curves facing existing firms will tend to shift left.
Monopolistically Competitive
Describes a market structure where many firms sell products that are similar but not identical, allowing for some degree of market power.
Demand Curves
Demand curves graphically represent the relationship between the price of a good or service and the quantity demanded by consumers, typically showing a downward slope.
- Ascertain the attributes and effects stemming from monopolistic competition, encompassing product diversity and the financial success of enterprises.
- Interpret the implications of new firm entry on market competition, demand, and economic profits.
Verified Answer
SJ
Sunil JogpalJun 12, 2024
Final Answer :
True
Explanation :
In a monopolistically competitive market, as new firms enter, the variety of products increases, leading to a decrease in demand for the products of existing firms. This is represented by a leftward shift in the demand curves of these existing firms, as consumers now have more options to choose from.
Learning Objectives
- Ascertain the attributes and effects stemming from monopolistic competition, encompassing product diversity and the financial success of enterprises.
- Interpret the implications of new firm entry on market competition, demand, and economic profits.
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